VE (nee KE) v. VRJ

FCMC 7676 / 2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 7676 OF 2011

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RULING
(Variation of Costs Order Nisi)

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1. By a judgment of 4 June 2015 (“the Relocation Judgment”) I granted leave for the respondent father to relocate the 2 children of the family to his hometown in Colorado of the United States.  The corollary of this decision is that I rejected the petitioner mother’s application for joint custody, with care and control to her and access to the father.  At the same time, I gave an order nisi there be no order as to costs.  The respondent now seeks to vary the costs order nisi so that he has the costs of the two applications, to be taxed if not agreed.

2. For convenience, I shall continue to refer the petitioner mother as “P” and the respondent father “R”.  I shall also adopt the same nomenclature and abbreviations used in the Relocation Judgment.  As I have already set out the factual background to the applications, the evidence and my reasoning in the Relocation Judgment, I am not going to repeat the same here.  This Ruling has to be read together with the Relocation Judgment.

The Children Applications

3. The applications were heard together in several tranches over the period from 23 September 2014 to 19 March 2015, with closing submissions completed in May 2015.  As I commented in the Relocation Judgment, this is a high conflict case.  The trial was originally set down for 6 days; eventually it took 17 days to complete the evidence.  Apart from the parties, the social welfare officer, the government clinical psychologist, R’s fiancée and a private clinical psychologist were arranged to give evidence in court.  The paternal grandfather, who was in the United States, gave evidence by electronic means in the Technology Court.  In addition to these testimonies, the court was also assisted by 4 social investigation reports, an international social investigation report and 4 clinical psychologists’ reports, the most significant one was a report dated 30 September 2014 by Dr Levy (“Dr Levy’s report”).

4. The parties’ ancillary relief dispute was disposed of by a Judgment dated 5 October 2015 (“the AR Judgment”).  This was the outcome of a 5-day trial.  Essentially, what the court had to deal with was how the net sale proceeds of the matrimonial home, stood at about $3.8 million and retained in court, were to be distributed.  After having $1 million set aside for the benefit of the 2 children of the family, I allowed P to have the balance of the net proceeds; it was, of course, subject to the Director of Legal Aid’s first charge.  In addition, I ordered that R has to pay P a monthly maintenance of $7,000.  As I observed in paragraph 180 of the Relocation Judgment the parties have no intention and no ability to communicate and work anything out sensibly for the benefit of the children.  I believe as of now the parties are still at loggerheads in respect of almost all issues.  

5. I understand from Ms Tsui for P that the net proceeds which P was awarded would in all likelihood be used entirely for reimbursing the costs of the Director of Legal Aid.  I believe, if costs are awarded, in all probability they would have to be paid out from public purse.

Legal Principles

6. It is common ground that while costs are in the discretion of the court the general principles as regards costs in children cases are that there should be no order as to costs save when one party has been unreasonable or reprehensible in the conduct of the litigation, as parents should not be deterred from putting cases concerning children before the courts: R v R (Costs and Child Case) [1997] 2 FLR 95, and Re G (Costs:  Child Case) [1999] 2 FLR 250, H v H, CACV 42/2002 (date of judgment: 6 September 2002).

7. Behaviour beyond the band of what is reasonable may result in an order for costs against that party.  In Keller v Keller and Legal Aid Board [1995] 1 FLR 259 Wilson J (as he then was) said at 265:

No one suggests that the court's discretion in respect of costs under s 51(1) of the Supreme Court Act 1981 has become emasculated in children cases. The position is only that in most such cases, indeed in ordinary cases, the proper weighing of the factors in the exercise of the discretion is likely to lead to the choice of no order inter partes. Where, for example, the conduct of a party has been reprehensible or his stance in the litigation has been beyond the band of what is reasonable, an order for costs might well be made against him. Equally a marked disparity in wealth, such that, for example, the wife's costs would bear harshly upon her economy but could be discharged by the husband without significant impact upon his economy, might give rise to an order against him.

8. When assessing whether a party’s conduct has been unreasonable, what should be considered is unreasonableness in the attitude to the litigation.  Hale J (as she then was) made the celebrated remark in R v R (Costs: Child Case) [1997] 2 FLR 95 at 98B that parents are expected to be unreasonable:

It is urged on his behalf that he was not totally unreasonable. The judge does indeed point to the good features about him and his relationship with R. He made some complaints about the mother's care of R to which the judge gave some credence, although it is right to say that in comparison with his criticisms of the father these are very limited indeed. It is further argued that it is not right to penalise the father for defects in his character which cause the apparent unreasonableness of his attitude. The fair point is made that in children cases one must not confuse unreasonableness in relation to the child – because one might say that we are all expected to be unreasonable in our attitudes to our children – and unreasonableness in the attitude to the litigation. However, it is quite clear that the judge took the view that the father had indeed been unreasonable in relation to the litigation. Of course, the parties should not be deterred, by the prospect of having to pay costs, from putting before the court that which they genuinely think to be in the best interests of the child, but there have to be limits. Children should not be put through the strain of being subject to claims that have very little real prospect of success, still less should they be put through a quite unreasonable involvement in their parents' disputes, to the extent that R was in this case. He was taken to see a psychologist, whom the judge described as totally unqualified to give an opinion on the case. We learn that this was done without the leave of the court. The judge made various criticisms of the psychologist's methods and described him as a 'paid hack'. He was also taken to see a solicitor between the end of the evidence and the judge's giving judgment. In other words, there was conduct in relation to the litigation which goes way beyond the usual sort of attitude which a concerned parent shows in relation to the future of his child.     (emphasis added)

9. Subsequent to the hearing and entirely unrelated to the present application, my attention was drawn to two recent judgments by the UK Supreme Court giving authoritative guidance on the issue of costs in children cases.

10. In Re T (CareProceedings:Costs) [2012] UKSC 36, [2012] 1 WLR 2281, Lord Phillips PSC restated that “the general practice of not awarding costs against a party, including a local authority, in the absence of reprehensible behaviour or an unreasonable stance, is one that accords with the ends of justice”: §44.

11. In Re S (A Child) [2015] UKSC 20, [2015] 1 WLR 1631, Lady Hale DPSC explained the rationale for the general practice:

“18 As long ago as Gojkovic v Gojkovic [1992] Fam 40, 57, the Court of Appeal observed that it was unusual to make an order for costs in children's cases. In Keller v Keller and Legal Aid Board [1995] 1 FLR 259, 267–268, Neill LJ went further: “In the last decade, however, it has become the general practice in proceedings relating to the custody and care and control of children to make no order as to the costs of the proceedings except in exceptional circumstances.” He did, however, go on to say that it was “unnecessary and undesirable to try to limit or place into rigid categories the cases which a court might regard as suitable for such an award”.

19 Nevertheless, the cases which might be regarded as suitable may be deduced from the reasons why the courts have adopted the “no costs” approach. The classic explanation is that given by Wilson J in Sutton London Borough Council v Davis (No 2) [1994] 1 WLR 1317, 1319:

“Where the debate surrounds the future of a child, the proceedings are partly inquisitorial and the aspiration is that in their outcome the child is the winner and indeed the only winner. The court does not wish the spectre of an order for costs to discourage those with a proper interest in [the welfare of] the child from participating in the debate. Nor does it wish to reduce the chance of their co-operation around the future life of the child by casting one as the successful party entitled to his costs and another as the unsuccessful party obliged to pay them. The proposition applies in its fullest form to proceedings between parents and other relations; but it also applies to proceedings to which a local authority are a party. Thus, even when a local authority's application for a care order is dismissed, it is unusual to order them to pay the costs of the other parties.”

20 Whenever a court has to determine a question relating to the upbringing of a child, the welfare of the child is the court's paramount consideration: section 1(1) of the Children Act 1989. This applies just as much to care proceedings brought to protect a child from harm as it does to disputes between parents or other family members about the child's future. Although the proceedings are adversarial in form, they have many inquisitorial features. An application cannot be withdrawn without the court's consent: FPR r 29.4. The court is not bound by the cases put forward by the parties, but may adopt an alternative solution of its own. The court is not bound by the choice of evidence put forward by the parties, but can decide for itself what evidence it wishes to hear. The court is very often assisted by the independent investigations and reports of the family court reporter (in private law cases) or the children's guardian (in care and adoption proceedings) and other experts. Even in care proceedings, there are many possible outcomes available to the court. Thus, for example, in a case such as this, the available outcomes ranged from a closed adoption with no contact (other than letterbox contact) with the birth family to the child going to live with her father with no further intervention by the local authority. In between could be, for example, an open adoption, a special guardianship order, long term fostering under a care order with only limited contact with the birth family, medium term fostering with increasing contact with a view to restoring the child to her birth family in due course, placement with the birth family under a care order, placement with the birth family under a supervision order together with a child arrangements order, a child arrangements order or even no order at all. It can readily be seen, therefore, why in such proceedings there are no adult winners and losers—the only winner should be the child.

21   Furthermore, it can generally be taken for granted that each of the persons appearing before the court has a role to play in helping the court to achieve the best outcome for the child. It would be difficult indeed for a court to decide how to secure that the child has a meaningful relationship with each parent without hearing from them both. It would be difficult indeed for a court to decide the best way of protecting a child from the risk of harm without hearing from her parents and those whose task it is to protect her. That is why parents are compellable witnesses in care proceedings, even when it is alleged that they have committed criminal offences. No one should be deterred by the risk of having to pay the other side's costs from playing their part in helping the court achieve the right solution.”

12. There are other considerations justifying the “no costs” approach.  Lady Hale pointed out that generally parents are assumed to have been motivated by concern for their child’s welfare and want the best for their child as they see it: § 22.  Parents need to be able to co-operate with one another after the case is over.  Stigmatising one party as the loser and adding to that the burden of having to pay the other party’s costs is likely to jeopardise the chances of their co-operating in the future: § 23.  There is also the consideration that having to pay the other side’s costs, or even having to bear one’s own costs, will reduce the resources available to look after the children: § 24.

13. That said, Her Ladyship remarked that one consideration that the court could not legitimately take into account was whether a party was, or was not, legally aided: § 25.

14. Her Ladyship concluded in § 26 that costs order should only be made in unusual circumstances,

26   … They lead to the conclusion that costs orders should only be made in unusual circumstances. Two of them were identified by Wilson J in Sutton London Borough Council v Davis (No 2) [1994]1 WLR1317, 1319: “where, for example, the conduct of a party has been reprehensible or the party's stance has been beyond the band of what is reasonable: Havering London Borough Council v S [1986] 1 FLR 489 and Gojkovic v Gojkovic [1992] Fam 40, 60C–D”. Those were also the two circumstances identified in In re T, at para 44.

15. Significantly, Lady Hale further said that the exceptional categories recognised in Re T are not closed.  The possible exceptions are not confined to reprehensible behaviour or unreasonable stance.  There may be other reasons why an award of costs might be justified; financial hardship might be one of the other reasons.  Her Ladyship said the following in § 33,

“…The object of the exercise is to achieve the best outcome for the child. If the best outcome for the child is to be brought up by her own family, there may be cases where real hardship would be caused if the family had to bear their own costs of achieving that outcome. In other words, the welfare of the child would be put at risk if the family had to bear its own costs. In those circumstances, just as it may be appropriate to order a richer parent who has behaved reasonably in the litigation to pay the costs of the poorer parent with whom the child is to live, … if otherwise the child's welfare would be put at risk…”

16. Guided by these authorities, I now deal with R’s application.

The Respondent’s Grounds

17. While acknowledging the usual practice is no order as to costs, Ms Irving for R submitted that the present case is one that is appropriate for a costs order to be made against P. Ms Irving agreed that P did not want the children to leave and that she spent significant time with them but R had put forward a clear and workable proposal while P simply did not have any reasonable plan or proposal which could have been implemented for court’s assessment.   There was never an arguable case from P; her case was a hopeless case.

18. Ms Irving also made the point that due to P’s unreasonable opposition, apart from the legal costs allowance of $1 million that was paid out from court for the relocation application, R incurred huge debts to his former solicitors, who took out a statutory demand against him for $3.5 million.

The Petitioner’s Response

19. Ms Tsui emphasized that R would have to demonstrate that P was so unreasonable that warrants a costs order against her.  As the mother of her children, P was only acting in a responsible manner to oppose R’s application for relocation.  At the time when R took out the application in December 2013, the daughter was only around 11 while the son was only 9.  They had just started to live together with R’s new partner IY and it was not surprising for the children to feel insecure and wanted to stay with P in Hong Kong.  The children might not be telling the truth when they told P that they did not want to go to Colorado; yet this was not unreasonable conduct on the part of P.  

Discussion

20. To begin with, I remind myself that it is unusual to give a costs order in children proceedings.  What I should consider is: are there any exceptional circumstances justifying a deviation from the usual no order as to costs? 

21. R has two grounds.  The first is that, adopting an unreasonable stance, P’s case was a hopeless case. The second is her reprehensible behaviour in the conduct of the proceedings.

P’s Hopeless Case

22. Speaking of hopeless application, Butler-Sloss LJ in Re G (Costs: Child Case) [1999] 2 FLR 250 said at 252G:

If this judge in this case had found that this father had behaved unreasonably in the litigation and had gone beyond what many fathers do, seeking orders which are hopeless, the point will come at which pursuing a hopeless application becomes unreasonable. But hopelessness and unreasonableness are not necessarily the same thing. Indeed, particularly where there is a litigant in person, a degree of generosity towards a litigant may be more appropriate than to a litigant who is on legal aid generally advised by counsel and solicitors as to the extent to which they should continue to litigate.

23. Her Ladyship then added at 253D:

It seems to me that the case of R v R does not change the normal situation that it is unusual to order costs, although it will be appropriate to order costs when a parent, even a litigant in person, goes beyond the limit of what is reasonable to pursue the application before the court. I would not like this judgment to be seen in any way as suggesting that judges do not have the jurisdiction and ought not in the appropriate case to make an order that one parent should pay the costs of the other parent in children cases. But because it is an unusual order, it ought to be clear on the face of the transcript, either in the judgment or preferably in the order for costs, as to why it is that the normal situation is not being followed in this case. It is obvious that the judge did not put his mind to this point as to whether or not this was an unusual case.

24. Ms Irving stressed that while R had a workable and reasonable plan, it was clear that P’s plan was entirely ill thought out, and in fact it was not a “plan” as such but a demonstration of how far she had gone in entirely ignoring the realities of the parties’ circumstances in Hong Kong.  P advanced a case that R was using finances as an excuse in order to remove the children from her.  She simply disagreed with anything she did not like, with no real consideration given to the issue.  She disagreed that the Colorado home was suitable, disagreed that the children’s school in Colorado would be free (on the ground that some schools are not free), did not agree that R could not find a job in Hong Kong and was hampered by age and lack of Chinese language ability, did not agree that having lost a highly paying job, R could not afford to maintain 3 households.  The fact that P was oblivious to reality, or in complete denial, cannot be regarded as reasonable. 

25. Ms Tsui did not seek to argue that P had ever put forward any workable proposal for court’s consideration. It is plain that she had none.  In response, Ms Tsui stressed that even a hopeless case should not be considered as unreasonable and also made the point that P was not being deliberately unreasonable. Nonetheless, she conceded that P did not take the family’s economic reality into consideration.  That said, Ms Tsui argued that P could not have a concrete plan because she was at all times financially dependent upon R.

26. With respect, the economic reality was not something so abstract that it was impossible to fathom out. It was merely a matter of simple arithmetic, as can be seen from my simple calculation in §§ 79-80 of the Relocation Judgment.  Even on her own case, R and the children would not be able to survive in Hong Kong.

27. It is noteworthy that as a matter of fact, P raised the same issue of economic reality back in October 2013 (some two months before R’s Relocation Application) when the court was dealing with P’s application for an injunction against R’s retirement funds, resulting in another judgment handed down on 22 November 2013.  At that time R had already lost his job.  Mr Cough, the counsel on behalf of P on that occasion, validly made the observation that maintaining “two households in (their neighbourhood) is bound to be expensive.  It is difficult to contemplate managing on less than HK$1.5 million per annum”[1].  Mr Clough also accepted that P did not have the earning capacity to maintain herself and the two children in Hong Kong and R was unemployed.[2]  As regards the children, on behalf of P, Mr Clough made the following submissions in paragraph 31 of his skeleton:

31.   The Children

i.  The present arrangements cannot be maintained.  Hong Kong international education is expensive.  The children have moved from the less expensive Japanese International School to (delete) International School.  (P) earns HK$5,000 per month.  Current expenses for the children are about HK$50,000 per month.

ii.    The parties are already running out of funds.

iii.    Before there is any final resolution of this case, the parties have to deal with the future of the children. It is unsatisfactory to spend more and more money on interlocutory applications concerning the ancillary relief claim when the future of the children remains in doubt.

28. Plainly, P was fully aware of the family’s dire financial situation well before R’s relocation application.  It should have been clear in her mind long before the trial that the family’s liquid asset retained in court was being drained every month in maintaining 3 households.  Yet, she was in denial of the economic reality in the subsequent relocation trial.  It is indubitably an unreasonable stance in litigation.

29. It is true that P apparently had the support of Ms Cheng, the social welfare officer.  It can be argued that her case was therefore not hopeless.  As I said in §106 of the Relocation Judgment, Ms Cheng’s conclusion was arrived on the basis of a false premises that R could stay.  She did not support relocation because it was to the best interest of the children that the then existing arrangement was to be kept intact but clearly that could never be the case.  When Ms Lim, the government clinical psychologist, was giving evidence she already had Dr Levy’s report available to her.  She also repeatedly raised her concerns over P’s emotional and anger management problem; especially when P had to take care of the children single-handedly in Hong Kong. 

30. Ms Cheng finished her evidence on 26 September 2014 and Ms Lim finished hers on 9 December 2014.  In my view, bearing in mind that by then Dr Levy’s report was already available whatever support P might have had from these professionals had apparently gone.

31. It must have been obvious to anyone involved in the trial that Dr Levy’s report of 30 September 2014 would be catastrophic to P.  It could not have been anything else.  Dr Levy’s report was essentially Dr Pon, the children’s play therapist’s report.  The report raised serious concerns over P’s emotional stability and anger management problem.  P was bad tempered and might have outburst to the children under stress.  It was reported that there was open hostility from P to R and concern was raised regarding the effect of this on the children.  There was an opinion that the children could be somewhat fearful of disappointing their mother due to her reactions and history of unpredictability when upset with them. The children would often censor their true feelings and thoughts when interacting with their mother.  The children were afraid of telling the mother their true feelings.  There were also reports of the son being slapped by the mother and that P lost her temper easily: §§ 120-126.  What is more, Dr Pon indicated that the children had demonstrated a great deal of improvement and growth and were likely to be adaptable and resilient, and would be able to cope with a new environment such as relocation would entail: § 164.  Yet faced with this report P simply made an unsupported claim that Dr Pon had apologized to her for some of the remarks made in the report.  In short, P was, throughout, in complete denial, but this caused significant costs to be incurred.

32. In contrast to the father in Re G (Costs: Child Case), supra, who was a litigant in person and so might be afforded a degree of generosity, P was legally represented by a specialist matrimonial firm and specialist counsel throughout. I agree with Ms Irving that P had the ability to be realistic on the overall situation.  Her opposition to R’s application was not fuelled by reason.  She must have been fully aware of her emotional and anger management problems.  She was not able to consider children’s interest rationally.  It is plain that she stood to oppose whatever R proposed.  As a result a great deal of costs was spent.

P’s Unreasonable Conduct in the Litigation

33. P always maintained R’s relocation plan was aimed at hurting and punishing her. The financial reason was just an excuse.  This was, and probably still is, the subjective but unsubstantiated belief that she firmly held.  While it is understandable for the parties to have adopted this kind of attitude in matrimonial proceedings, especially in a high conflict case, in my view, it is quite beyond the band of reasonableness for P to have listed out the education choices in Japan as an option in her affirmation when she maintained that she was not considering moving to Japan with the children.  I also made the comment that I was not sure whether P’s opposition was motivated by her genuine concern for the future of the children’s welfare.  This comment was made against the background that she did not agree – without any reasons - that the Colorado home was a safe home or proper accommodation, that schooling in primary and secondary school is free of charge and that the children would be on “through-train” as local students to university.  She failed to agree to what, in the eyes of anyone, were glaringly and plainly true.  If she had given thought to these matters objectively, with a genuine concern for the future of the children, I am sure she would have given different answers. 

34. It should not be forgotten that I also considered P needed to be censured for having orchestrated the writing up of the daughter’s diaries for the purpose of exhibiting the same to court.  It was a breach of trust that the daughter had in her when the daughter would never have imagined that what she wrote would have formed part of the evidence adduced in court.

35. How the original equal split of time under the consent order was changed to 9-night / 5-night arrangement with R having the greater share was subject to considerable debate in trial.  I found it was illogical and did not make any sense for P to say that the change was due to R’s insistence and threat.  It was simply unreasonable for her to say she had no choice but to accede to R’s request: § 99.

36. P did not make a frank and full disclosure about the intended relocation to New York back in October 2010 when she made her ex parte application for a non-molestation order against R; and she was not telling the truth when she insisted that R did not consult her.  She also denied having sent the emails to R’s father informing him that she was not going to stay with R anymore and would not go to New York: § 168-172.  I accept that these matters related to what happened before the applications; as such they were of marginal relevance.  Yet time was wasted in trial in dealing with these matters.

Disparity in Wealth

37. The disparity of wealth between the parties is a matter to which the court may give regard in appropriate circumstances. Ms Tsui reminded me that there is no information as to R’s employment or his current income in US and that there may well be a wealth disparity issue which would disallow the court to order costs against P.  As I found in the AR Judgment, there is a huge disparity in the parties’ earning capacity: § 65 of AR Judgment. However, the unchallenged evidence in the ancillary relief trial was that R was merely expected to earn $76,650 (or USD9,890) after tax per month upon return to the United States.  Apart from being heavily indebted to his former solicitors, R continues to fully maintain the children and pay maintenance to P.  Despite the criticism from P over the lack of particulars of the legal costs owed by R, the statutory demand issued against him has not been challenged. As I observed in the AR Judgment, the family was effectively bankrupt.  I think it is fair to say that both are insolvent. Thus analyzed, I do not think the disparity in wealth carries weight. 

Other Considerations

38. Ms Tsui relied upon my observation in paragraph 151 of the Relocation Judgment that both parents were capable parent in giving adequate care and control to the children but this was made in the context where both continued to live in Hong Kong.

39. Ms Tsui also drew my attention to how co-operative P was in agreeing to a consent order on 24 October 2012 granting sole custody to R and joint care and control with equal split of time between the parties over a 14-day cycle.  She also stressed that P was amenable to resolve the dispute by mediation in order to save costs.  I accept these happened but they were either pre-applications or shortly after the applications were taken out. 

Should the Costs Order Nisi be Varied?

40. The ultimate question is whether the costs order nisi ought to be varied.  I remind myself that I should not fall into the error of awarding costs on the basis of “costs to follow the event”.  The benchmarks are whether there are unreasonable stance and reprehensible conduct on the part of P.

41. As far as the economic side is concerned, P never had a sensible proposal for the court’s consideration.  On that view, her case was hopeless from its inception.  I have not lost sight of the fact that she had some support from the social welfare officer.  Seen in this light, her stance should not be considered as so unreasonable that placed itself at the end of the scale.  Yet, with the advent of the oral testimonies of the professionals and Dr Levy’s report, her case had become entirely hopeless.  Dr Levy’s report was released on 30 September 2014 and as said above, Ms Cheng and Ms Lim finished their evidence on 26 September 2014 and 9 December 2014 respectively.  It was not until 10 March 2015, thus a lapse of 3 months, when P started to give her evidence.  With the assistance of her legal advisers, she should have had sufficient time to review her stance and the ability to be reasonable.  Added to this are my findings above that P was unreasonable in the conduct of the litigation.  Considering all these factors in a round, in the event I am satisfied that there are unusual circumstances that warrant a costs order.  Doing the best I can I consider it is fair that she has to bear half of the costs of the two children applications.

Conclusion and Order

42. For the above reasons, I am prepared to vary the costs order nisi.  I give an order that the order nisi dated 4 June 2015 be varied such that the petitioner is to pay half of the respondent’s costs of and incidental to the summonses dated 3 December 2013 and 28 February 2014, including costs reserved, with counsel certificate and to be taxed if not agreed.  The petitioner is also to pay half of the respondent’s costs of variation, again, including all costs reserved, with counsel certificate and to be taxed if not agreed.  As for the remaining half, it should be no order as to costs.  The petitioner’s own costs to be taxed in accordance to the Legal Aid Regulations.

FCMC 7676/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 7676 OF 2011

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J U D G M E N T
(Leave to Appeal)

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Introduction

1. This is an application for leave to appeal by the respondent husband against some of my decisions on the ancillary reliefs of the parties upon their divorce as set out in a Judgment handed down on 5 October 2015 (“the Judgment”).

2. For convenience, I continue to adopt the same abbreviations of the persons involved.  Thus, the petitioner wife is referred to as “P”, the respondent husband “R”, their daughter “J” and their son “A”.

3. In trial, what I had to deal with were essentially two issues.  The first was the disposal of the balance of proceeds of sale of the matrimonial home being held in court and the second was on the maintenance of P and the children of the family.  I decided that out of the $3.8 million being held in court, $1 million should be applied for the benefit of the 2 children and the balance should go to P.  In coming to the award as I did, I considered the needs of the parties were determinative and that the assets available were insufficient to cater for the needs of both parties: §§ 64 and 91 of the Judgment.  I gave priority to the needs of the children of the family (§§ 75 – 80 of the Judgment) and I considered that since R had already got the US Colorado Home and the US retirement funds, it was fair for P to have the balance of the sale proceeds after the needs of the children had been catered for (§§ 82 – 84 & 92 of the Judgment).  Thus, I gave the following orders:

1.    A lump sum of $1,000,000 be released and paid out to R from the monies now being held in court for the benefit of the two children of the family, namely, J and A, with $500,000 for each of them;

2.    R shall place the monies into two joint accounts, with $500,000 each.  One account is to be in the joint names of R and J and another account in the joint names of R and A.  R shall only use the monies exclusively for the education expenses including university tuition of J and A;

3.    R do pay P a periodical payment of $7,000 per month for the maintenance of P.  The first payment to be made on or before 1 November 2015 and thereafter on the 1^st day of each and every month during the joint lives of the parties or until the remarriage of the petitioner, which is the shorter;

4.    After the payment out of $1,000,000 according to paragraph 1 above and subject to the First Charge of the Director of Legal Aid the balance of the money held in court be released and paid out to the petitioner’s solicitors or the Director of Legal Aid;

5.    Subject to the First Charge of the Director of Legal Aid the balance of the escrow money now being held by P’s solicitors be released and paid out to P or the Director of Legal Aid;

6.    The respondent is to return the children to Hong Kong on school Christmas holidays, summer holidays and school holidays with not less than 14 days, if any, for the petitioner to exercise care and control on the children.  The respondent is to be responsible for the children’s cost of flights; and

7.    The Order dated 27 February 2015 allowing for withdrawals is set aside.

8.    There be an order nisi of no order as to costs of the ancillary relief proceedings, including all costs reserved. The petitioner’s own costs to be taxed in accordance with Legal Aid Regulations, with counsel certificate.

4. By his summons dated 2 November 2015, R applied for leave to appeal against paragraphs 3, 4 and 8 of the Order.  Subsequently, by a letter dated 23 February 2016, R abandoned his appeal against paragraph 3.  I was told in the substantive hearing that, in compliance with the order, R has been making periodical payments to P.  Thus, what remain are R’s challenge against my decisions (1) to award P the remaining sum being held in court in the region of $2.86 million and (2) to give no order as to costs of the ancillary relief.

5. Apart from leave to appeal, R also seeks a stay of execution pending the determination of his leave application.  There is also a minor issue that R asks to have his living expenses for September and October 2015 paid out according to the order dated 27 February 2015.  These are the monies that he was entitled to prior to the Judgment.

6. As I have already set out the parties’ case and the finding of facts in the Judgment, I do not propose to repeat them here.  References to the relevant parts of the Judgment will be made as and when necessary. 

The Legal Principles

7. The parties have no dispute over the applicable legal principles.

8. The threshold for granting leave is provided in section 63A(2) of the District Court Ordinance (Cap 336) (“the DCO”):

“Leave to appeal shall not be granted unless the judge, the master or the Court of Appeal hearing the application for leave is satisfied that –

(a) The appeal has a reasonable prospect of success; or

(b)  There is some other reason in the interests of justice why the appeal should be heard.” [emphasis added]

9. The Court of Appeal discussed the application of s 63A(2) of the DCO in Sunny Tadjudin v Bank of America, National Association (unrep.,  HCMP No 691 of 2012, 29 June 2012) at §§ 8 – 9:

“8. Under section 63A(2) of the District Court Ordinance, Cap 336, leave to appeal to the Court of Appeal shall not be granted unless the Court of Appeal is satisfied that the appeal has a reasonable prospect of success, or that there is some other reason in the interests of justice why the appeal should be heard. Counsel relies on both limbs in section 63A(2) in seeking leave to appeal.

9. Reasonable prospect of success involves the notion that the prospect of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable” (SMSE v KL [2009] 4 HKLRD 125 para 17). Furthermore, it is pertinent to bear in mind that even if there is a reasonable prospect of success on appeal, the court still retains a discretion whether to grant leave to appeal, although the fact that there is, ex hypothesi, a reasonable prospect of success would heavily influence the court’s exercise of discretion (Ho Yuen Ki Winnie & Ors v Ho Hung Sun Stanley & Anr. HCA 391/2006, 25 May 2009, A Cheung J para 3; and HCMP 1009/2009, 24 August 2009, para 22).”

10. R has two grounds of appeal.

Ground 1:  Legal Cost and First Charge of the Director of Legal Aid (“DLA”)

R’s Case

11. Mr Cooney SC, who appears in this application but not in trial, submits that I erred in finding that, subject to taxation, P had a liability of $5,778,893, being “legal costs owed by P to DLA” (§ 18 of the Judgment).  In fact, these monies were not liabilities of P prior to the Judgment.  Further, I also erred in treating DLA’s first charge as a liability of P.

12. The only liability P had prior to the judgment, as far as legal costs were concerned, was the total contribution payable by P to DLA pursuant to section 18(1)(b) of the Legal Aid Ordinance, Cap 91. P was and is under the Ordinary Legal Aid Scheme.  The amount of contribution that an aided person is required to make under this Scheme ranges from nil up to 25% of his financial resources as assessed by DLA, with a ceiling of $72,595: Regulation 13 and Part 1 of Schedule 3 of the Legal Aid (Assessment of Resources and Contributions) Regulations, Cap 91B.  Thus, the amount of contribution that P was required to make was at most $72,595.  It could never have been as high as $5,778,893.  That was the money spent by DLA but certainly that was not P’s liability.

13. DLA’s first charge was also not a liability prior to the award of the balance of the sale proceeds.  Section 18A(1) of the Legal Aid Ordinance, Cap 91 provides that,

(1)  Subject to this section-

(a) the amount of a contribution to the extent that it is unpaid; and

(b) except where legal aid has been granted under the Supplementary Legal Aid Scheme, if the total contribution is less than the net liability of the Director on the aided person's account, a sum equal to the deficiency,

shall be a first charge for the benefit of the Director on any property, whether situated in Hong Kong or otherwise, which is recovered or preserved for the aided person in the proceedings or in any other proceedings in respect of which the person was aided and which, in the opinion of the Director, were substantially related to or connected with the proceedings in which property was recovered or preserved.

(2)…

(emphasis added)

14. Thus, the charge would spring into existence only when and if an aided person is successful in recovering or preserving property in the legally aided proceedings. If P is successful in recovering or preserving property, she would be required to repay DLA all sums paid or payable on her behalf out of the property recovered or preserved.  Accordingly, where no money or property was recovered or preserved, P would not be required to pay any costs and expenses incurred on her behalf, save and except the contribution payable under the said section 18(1)(b).

15. In the premises, I should not have taken DLA’s first charge or DLA’s legal costs incurred into consideration when rendering my decision or found that they were liabilities of P.  It follows that I also erred in finding that since R already has the Colorado Home and the retirement funds, “it is fair that P should be given the remaining sum in court for her maintenance, inclusive payment of her legal costs”: § 83 of the Judgment.

16. In contrast, the legal costs incurred by R were in every sense his personal liability.  Any monies that go into paying R’s legal costs would detract from the matrimonial pot that he can spend on raising and meeting the future need of J and A.  In view of the court’s finding that the family is effectively bankrupt, R’s significant net liability of $2,236,417 and P’s insignificant liability (ie without legal costs liability), it is only fair that R be given the remaining balance in court.  On the other hand, awarding the funds to P would have the result of having DLA’s first charge springing into existence and the end result would be to divert what little resources the parties have left away from the children and into the coffers of DLA.

P’s Case

17. In response, Ms Tsui submits that though it was not expressly spelt out in the Judgment, it was understood by all during trial that P’s legal costs was a contingent liability. Every time when the parties came to court, the court’s attention was drawn to their estimates of costs by way of Form H. The court should take into consideration any liabilities even contingent liabilities in the calculation of the family’s assets and liabilities in order to have an overall picture and then come to a fair conclusion.  It is unrealistic for the court to disregard this contingent liability of P in the computation of the total family assets subject to distribution or in the consideration of the financial needs of the parties. She refers me to the case of Luk Mok Ngan Cheung v Luk Hoi Chuen (unrep., CACV 23/1990, 4 December 1990) where both parties were legally aided and the Court of Appeal confirmed that the wife’s liability for costs as a relevant consideration in determining the appropriate distribution of assets: § 10. There is also Murphy v Murphy [2005] HKFLR 280, another Court of Appeal case, where it was opined that the judge should consider the likely amount of the legal aid first charge and its possible impact in coming to the final conclusion: § 56.

18. She stresses that from the very beginning R insisted that P should get nothing and he was to have all the monies for his legal costs.  If R had raised that all the proceeds should be given for the maintenance of the children, P probably would have agreed but it is now too late for R to say that the proceeds could have been better spent on the children.  The fact was at the time of trial both wanted the money for their legal costs.  In allowing P to have the balance, the court has determined that P should not leave the marriage empty-handed and has considered all the factors under section 7 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”).

19. Ms Tsui informs the court that P was required to make a contribution of $8,580 when she was granted legal aid.  This was based on the assessment of DLA on her means under the said section 18(1)(b).  When P was in receipt of $44,000 each month from the escrow funds as her living expenses, the money was subject to DLA’s first charge of $6,021 per month pursuant to the said section 18A(1)(b).  That was the $6,000 referred to in trial and in paragraph 62 of the Judgment.  When P started to receive maintenance of $7,000 per month according to the Judgment, DLA’s first charge was reduced to $2,200.  It is still unknown as to how much the DLA’s first charge would be at the end of the day. 

Discussion

20. Mr Cooney accepts that DLA’s first charge is a contingent liability.  As a matter of fact, in her Answers to R’s Questionnaire dated 28 March 2013, when being asked about the Legal Aid first charge, P’s reply in this regard is clear: “The Legal Aid charge does not materialize until Legal Aid has finalized the amount subject to the outcome of ancillary relief matter”.

21. The question thus is, as I see it, whether a party’s contingent liability should be a factor that the court needs to consider in the exercise of its discretion under section 7 of MPPO.

22.    Jackson’s Matrimonial Finance (9^th Ed), Butterworths, has this to say on contingent liabilities at § 5.144,

“… The manner in which the court does so and the impact on the court’s order will depend on all the relevant circumstances of the particular case.  In Charman v Charman (No 2) the husband claimed that he had a potential UK tax charge of a little under £11m relating to certain of his interests which the wife disputed.  In his order Coleridge J dealt with this by providing a mechanism to enable the husband to recoup a sum equivalent to a portion of any tax actually paid.  Coleridge J’s approach was endorsed by the Court of Appeal in Charman v Charman (No 4)…”

23. What Coleridge J did was to impose an order which he described as a reverse contingent lump sum, namely that if the husband was required to make specified tax payments, estimated by the husband at £11 million, the wife should contribute thereto by way of repayment to him of 36% of all such payments: Charman v Charman (No 2), [2006] EWHC 1879 (Fam), 9 ITELR 173, [2007] 1 FLR 593, at § 94 & § 130.

24. In Marano v Marano [2010] EWCA Civ 119, [2010] 2 FCR 140, [2010] 1 FLR 1903, King J took a different approach.  Instead of imposing a contingent lump sum order, the learned judge ordered the wife to pay the husband a lump sum of £5 million, which, argued by the wife, would have the effect of requiring her to pay half of the potential US tax liability should the husband’s property development go to liquidation.  On appeal by the wife, it was argued on her behalf that the approach taken by the trial judge was unprincipled since the latent tax liability was not only nebulous but also unquantifiable since it ultimately depended upon a number of factors including the value of the husband’s property development at the date of disposal: § 34.  It was held by Thorpe LJ of the English Court of Appeal that the judge could have imposed a contingent rather an immediate liability on wife, but had certainly not been bound by authority to do so.  It was also held that the judge had been exercising a broad and general discretion to achieve fairness. The apparent correlation between the quantum of the lump sum and the latent tax liability was fortuitous and approximate: §§ 41 & 45.

25. Two points flow from these authorities.  The first is that the court should take contingent liability into account and the second is the court should exercise its broad and general discretion to achieve fairness.

26. As far as the impact of DLA’s first charge on the distribution of family’s assets is concerned, there appear to have no direct authorities on the issue. The two local authorities cited by Ms Tsui are not directly on DLA’s first charge but in my view, at least they support the contention that the court should properly take a party’s contingent liabilities under the legal aid scheme into consideration

27. R’s stance is that the court should have ignored the liability, whether actual or contingent, in its entirety in the section 7 exercise.  His position is essentially that the court should not have made any award to P at all so that DLA’s first charge would not have sprung into existence and P does not have to pay her costs at all.  I agree with Ms Tsui that R’s intention is obvious:  P’s legal costs liability should be met by public purse whereas his own legal costs should be met by the last bucket of cash kept in court.  In my view, this could not be a tenable argument.

28. It would be wrong for me not to consider the contingent liabilities.  This is a factor that the court needed to take into account under section 7(1)(b) of MPPO: “the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future”.  That was what I did in trial.  The children’s needs have been taken care of by the $1 million. R never advances any complaint, whether in trial or in this leave application, that this money is insufficient. I am not persuaded that I exercised my discretion upon a wrong principle, or that, my decision being so plainly wrong, I must have exercised my discretion wrongly. 

29. For the above reason, I do not find any reasonable prospect of success on this ground.  

Ground 2: Unreasonable Conducts of the Wife

30. Mr Cooney argues that while I was right to have observed that some of P’s allegations are unproven or groundless, I erred in finding that such unproven or groundless allegations are not relevant to the present proceedings. These conducts are relevant as section 7(1) of MPPO makes it a duty of the court to have regard to the conduct of the parties in exercising its discretionary jurisdiction.  Such conducts were inequitable to disregard and repugnant to anyone’s sense of justice; they were thus “obvious and gross”.

31. To this, Ms Tsui responds by saying that the court has noted that R has spent much time during trial to exonerate his name: § 67 of the Judgment.  The court has already given R much tolerance during trial for R to go back to matters irrelevant to ancillary relief but past events following the breakdown of the marital relationship. The court has come to a correct conclusion that none of the conduct complaint of by either party could amount to “obvious and gross” misconduct such that it would be inequitable to disregard.

Discussion

32. Mr Cooney confirms that the conducts complained of are litigation conducts on the part of P.  These are in relation to R’s allegation that P has made numerous false claims including spousal and child abuse in her application for an ouster order back in the early stage of the divorce proceedings.  It was also my view that these are litigation conducts: § 68 of the Judgment.

33. In LSY v HTF [2013] 2 HKLRD 1233 the Court of Appeal agreed with the English authorities in Tavoulareas v Tavoulareas [1998] 2 FLR 418 and M v M (Financial Provision: Party Incurring Excessive Costs) [1995] 3 FCR 321 and held that a distinction should be drawn between marital misconduct and litigation misconduct.  Only the former could justify a departure from equal division of the total assets between the parties, unless there were exceptional circumstances where the litigation misconduct was so extreme that it would be inequitable to disregard it.  Litigation misconduct would usually be sanctioned by orders for costs.

34. R’s complaints were without any particulars even up to the date of the substantive hearing. It has not been demonstrated to me whether there were any exceptional circumstances.  It also has not been demonstrated to me why the litigation misconducts complained of could not have been dealt with by way of an appropriate costs order. 

35. Lastly, even if R’s complaints were on marital misconduct, the same have been dealt with in the Judgment, specifically in § 69,

69.   I have heard all the evidence on these issues in the relocation trial.  I do not find any of the misconducts, whether those of P or R, or taken in totality, could amount to “obvious and gross” conduct such that it would in the opinion of the court be inequitable to disregard it.  In particular, it may be that P was violent as claimed but according to R, it was due to her mental illness, suffering from depression and maladaptive personality.  If that is the case, I fail to see how this could be “obvious and gross” misconduct.

36. For the above reasons, I also conclude that R has no reasonable prospect of success on this ground.

37. R’s leave application in respect of the costs order is contingent upon his success on appeal.  Given the conclusion I have come to, this application fails too.

38. There is also no other reason in the interests of justice why the appeal should be heard.

Interim Stay of Execution

39. Ms Tsui is agreeable that the payment out of the balance of $2.8 million be stayed pending the outcome of the leave application; there is no urgency for the money to be paid out forthwith.  As for R, he may take the matter further.  I give an order that there be a stay of execution of paragraph 4 of the order dated 5 October 2015 until 14 April 2016 or further order of the court, so as to allow R to make a further application for leave to the Court of Appeal within 14 days from the date of refusal: Order 58, rule 2(4A), RDC.

Payment Out pursuant to previous orders

40. In the course of the ancillary relief proceedings there were orders providing for interim maintenance of the parties, to be paid out from monies held in court.

41. The first was an order dated 17 April 2013 whereby R was entitled to have a total of $120,000 paid to him, of which $100,000 included the payment of mortgages, management fees, rates and rent and living expenses and $20,000 for his legal fees.  This order was superseded by another order dated 10 December 2014 pursuant to which the sum was reduced to $30,000 due to the fact that R was in receipt of an income.  Paragraph 3.4 of the said order states as follows,

3.4  HK$30,000 per month for the Respondent (HK$120,000 per month less HK$90,000) subject to his income, from December 2014 until the final determination of the ancillary relief matter in respect of these proceedings or further order, whichever is the earlier.

42. It is not in dispute that R did not apply for payment out for the months of September and October 2015.  R now wants to have him paid.

43. Notwithstanding that there was no formal application in this regard, the parties agreed to have the matter dealt with together with the leave application.

44. Mr Cooney informs the court that since his relocation to Colorado in August 2015, R had no earnings in the months of September and October 2015 so he is entitled to $240,000. 

45. Ms Tsui in principle has no objection to this but rightly points out that there is virtually no evidence in this regard. 

46. R has been properly represented since October 2015.  There were ample opportunities for him to adduce evidence up-dating his financial situation but he failed to do so. It seems clear to me that the order of 10 December 2014 had superseded the order of 17 April 2013, so plainly R was not entitled to $120,000 at the relevant time, not to mention that at all events the basis of allowing $120,000 had gone; for instance, he did not have to pay mortgage payments for the former matrimonial home anymore.  In fact, the costs structure of his living must have changed drastically since his relocation in August 2015.  There is simply no basis for him to set his eyes on $120,000.  It also seems clear that the order of 10 December 2014 remained valid until it was set aside by my order dated 5 October 2015.  For this reason, I would allow $60,000 ($30,000 for each month) to be paid out to R from the monies now held in court.  This would mean the balance of sale proceeds to be released to P would be reduced by this amount.

Orders

47. With the conclusion that I have reached, I give the following orders,

1.   The respondent’s application for leave to appeal be dismissed;

2.   There be a stay of execution of paragraph 4 of the order dated 5 October 2015 until 14 April 2016 or further order of the court;

3.   Notwithstanding the order dated 5 October 2015, the respondent be at liberty to have $60,000 paid out to him from the monies now being held in court.

Costs

48. R failed in his application.  I consider that “costs to follow the event” is appropriate.  I cannot think of any other form of order that is more appropriate in the circumstances: Order 62, rule 3(2A), RHC.  I am conscious that except the $60,000 that will be paid out to him, R has no substantial asset from which any cost order may be satisfied.  This, however, is not a reason why I should not give an order against him.  I give an order that the costs of the application be paid by the respondent with counsel certificate, to be taxed if not agreed.  The petitioner’s own legal costs to be taxed in accordance with the Legal Aid Regulations.

FCMC 7676/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 7676 OF 2011

----------------------------

----------------------------

__________________

J U D G M E N T
(Ancillary Relief)

__________________

1.  This is a trial on the ancillary relief of a high conflict case.

2.  For convenience, I continue to adopt the same abbreviations of the persons involved.  Thus, the petitioner wife is referred to as “P”, the respondent husband “R”, their daughter “J”, their son “A” and R’s fiancée “IY”.

3.  I am well familiar with this family, if I may still describe it by this term.  The parties have come before me on numerous occasions dealing with all sorts of disputes arising from these protracted proceedings.  In the last two years or so since this case has been docketed to me I have handed down two judgments on injunctions and one judgment on the relocation of the 2 children of the family.  Prior to all these for another 2 years they had already fought bitterly over a non-molestation order and the custody of the children.  The corollary is that the legal costs incurred are enormous; so enormous that they are exceeding $10,000,000 and are way out of proportion of the assets owned by the family.  It is not an exaggeration to say that the majority of the liquid assets have been evaporated, or in actuality transformed to become the revenues of their solicitors.  The horrible thing is that all along the parties have been fully aware of the situation and have been consciously and willingly to allow this to happen.  They paid no heed to the figures set out in their Form Hs (Estimate of Costs) filed on each and every hearing.  When it comes to the ancillary relief dispute, the parties are scrambling for the last bucket of cash now being kept in court in order to gratify their needs for their legal expense. Seen in this light, the real victims of this matrimonial warfare, if put in monetary terms, are J and A.

4.  R was at all time the breadwinner and P the homemaker.  This was the division of their role throughout.  A prominent feature is that the family’s finance has been in the red since April, 2013 when R was laid off by his employer MS.  R was then unemployed for about a year before he got a temporary consultancy contract at $90,000 per month since April 2014.  During this year, $164,000 per month, with $44,000 for P and $120,000 for R, had been withdrawn from savings to maintain the family pursuant to a consent order dated 17 April 2013.  With this temporary job, the parties withdrew less from savings but they were still in deficit.  Ms Tsui, for P, reckons that from April 2013 up to June 2015, a total of $3,078,000 was withdrawn.

5.  The only meaningful asset within the jurisdiction was the former matrimonial home in the Discovery Bay.  Again, it was after much hostility and only with the court’s intervention that the home was liquidated in December 2014 and the proceeds of sale were paid into court.

6.  By a Ruling dated 27 February 2015, I granted leave for R to withdraw from the monies paid into court for payment of (1) USD32,504 being his overdue US taxes and (2) $1,000,000 for his legal costs.  The remaining proceeds (“the Net Proceeds”) have been utilized for the maintenance of the parties according to the said consent order dated 17 April 2013, less whatever income they are able to earn, until the determination of the ancillary relief matter. 

7.  Further, by an order dated 4 June 2015, I gave leave for R to relocate the children back to his hometown in Colorado, United States of America, with care and control remains to be shared between the parents.  The arrangements are that the children are taken care of by their father during the school terms and by their mother during their holidays such as Christmas and summer break. 

8.  The background of the parties has already been detailed in my judgment dated 4 June 2015 (“the Relocation Judgment”) when I dealt with the relocation issue; it is not necessary for me to repeat the same here.  Suffice for me to say is that P is now 37 years old and is living alone.  R, now 54, has returned to his hometown with the 2 children of the family after the conclusion of this trial.  Also with him are his fiancée IY and their baby daughter.  They should now be settling in Colorado. 

Parties’ Open Proposals

9.  The parties, in their usual fashion, are poles apart when it comes to their open proposals.

10.  Initially, P sought the whole of the Net Proceeds principally for the purpose of paying her legal costs owed to the Director of Legal Aid.  According to Ms Tsui, if P gets anything less than $4,000,000, it is quite certain that all the money would go to the public purse.  If P is able to get a bit more than that, she may still have a small buffer.  This would provide her with some cash in times of need.  On the top of the Net Proceeds, she is seeking a periodical payment of $20,000 per month from R.

11.  As for R, his proposal is simple and also to me, somewhat distressing.  He does not think P deserves anything so the whole of the Net Proceeds should be paid over to him for the settlement of his liabilities, mainly his legal costs.  P should walk out of the marriage with nothing.

12.  Upon the court’s query why both parties seemed to have forgotten their children’s needs, P revised her open proposal the next day.  She is now willing to keep $1,000,000 for J and A’s university education and will negotiate with the Director of Legal Aid on the repayment terms of her legal costs.  The $1,000,000 will be held by her, either in her own name or in the joint names with the children, exclusively for their university education.  She is still seeking periodical payments of $20,000 per month against R.

Issues to be Determined

13.  As will be seen, there are not too many factual disputes between the parties. The only main issues are the size of the matrimonial pot and the entitlement of the Net Proceeds.

The Law and Legal Principles on Ancillary Relief

14.  The jurisdiction of the court in granting financial provision for a party and for a child of the family is governed by sections 4 and 5 ofthe Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”).  Pursuant to sections 6 and 6A of the same legislation, the court also has the power to grant orders for transfer, settlement or sale of properties.  In deciding on how to exercise its power in this regard, the court is bound to consider the principles set out in section 7 of MPPO.  These principles are to be interpreted in the light of the Court of Final Appeal judgment in LKW v DD (2010) 13 HKCFAR 537.  I will follow the steps set out by Mr Justice Ribeiro PJ in that judgment in the consideration of the application before me, namely, (1) identification of the assets, (2) assessing the parties’ financial needs, (3) deciding to apply the sharing principle, (4) considering whether there are good reasons for departing from equal division and (5) deciding the outcome.  As the parties have no dispute over the principles and the 5 steps to be applied, it is not necessary for me to set them out here.

Identification of the Assets

15.  For the present purpose, I adopt an exchange rate of USD$1 = HK$7.75. 

Financial Resources of the Petitioner

16.  P says she only has a Rolex watch now that is worth $23,000.  Previously, she disclosed in her Form E dated 17 August 2011 that she had valuables of about $95,000.  Her explanation that she has lost the other valuables during moving home is hard to believe.  Be that as it may, either figure is not a substantial sum.  I consider it is fair that P should continue to keep whatever she has.  Apart from this, she has a bank balance of about $107,000.

17.  According to her Form H dated 29 June 2015, her legal costs up to the conclusion of the trial on ancillary relief are estimated to be $5,778,893. 

18.  P’s assets and liabilities can be summarized as follows.

Schedule of Assets and Liabilities

Item no	Assets	Amount (HK$)
1.	Bank balance	107,000
2.	Valuables	95,000
	Total:	202,000
	Liabilities
3.	Legal costs owed to Director of	(5,778,893)
	Legal Aid (subject to taxation)
	Net:	(5,576,893)
		========

19.  Thus, P has a deficit of $5,576,893.

Financial Resources of the Respondent

Assets

20.  The Colorado Home, in R’s sole name, was purchased pre-marital in 1998.  According to the appraiser, it is worth USD350,000 ($2,712,500) as at 21 November 2013 but R assesses it at $2,730,000.  I would take the higher figure.  I accept that there is presently an outstanding mortgage of about $503,000; hence, its net value should be around $2,227,000.  I also accept that notwithstanding it was purchased pre-marital, income of R during the marriage was used to pay the monthly mortgage payments.

21.  R says there is an outstanding repair to the Colorado Home that he should have done back in 2014 and for this, he requires $93,600.  I would consider this as part of his liabilities.

22.  There are bank accounts maintained in the joint names with either J or A.  R confirms that he is able to operate all these accounts.  The deposits in the College Invest account and Coverdell ESA accounts are about $164,396 for each of J and A. This is sufficient for one year’s university tuition fees. That said, R says the deposits are not so much for savings.  Rather they are for tax planning.  The US taxation rules are that as long as the children do not have gifts of deposit more than USD10,000 a year, the deposit would be tax free.  Hence, this is a way to keep family money.  If in need, the money would have to be withdrawn.  It is not in dispute that as at the date of trial, the amount of money now being held in the joint accounts of R and his children is in the region of $546,676.  I see no reason why this sum is not included as part of the family assets.  I reckon that the total bank balance that R is able to operate is about $663,700. 

23.  The current value of his retirement funds stands at $1,153,900, of which $933,952 is pre-martial. 

Liabilities

24.  R’s claim that he owes J and A $500,000, the money that he withdrew from the joint accounts with the children for expenses, is groundless.  Equally groundless is that he treats his obligation to save $7,100,000 for his retirement as a liability.  Clearly, these are not legal liabilities; he is not going to sue himself if he is not able to save sufficient for his retirement.

25.  In strict legal sense, R’s fiancée IY was his domestic helper.  R paid a monthly wages of $3,920, food expenses of $875 and tuition fees in the total of $54,250 ($7,750 x 7 times) in order to help her to get back to part-time college.  This is no small sum of money.  On top of that, he also transferred from time to time $1,000 to $2,000 as family’s living or shopping expenses.  Ms Tsui argues that R’s expenses on his partner IY and the new baby daughter are unreasonable expenses and should be added back to the matrimonial pot.  Therefore, half of the bank and credit card liabilities, which stand at $715,420, should be deducted from the pot.  I agree that some of the expenses such as the tuition fees could have been avoided when R was managing a very tight budget but I am not convinced that all the expenses that go to the maintenance of IY and the baby daughter should be excluded.  Apart from the few thousand dollars that P earned monthly from her part-time job and the withdrawals from the escrow funds, R’s income had always been the main source of revenue for everyone.  I do not consider that the maintenance of IY and the baby daughter are unreasonable expenses that warrant exclusion. Adopting a broad brush approach, I would allow 80% of the liabilities as family’s liabilities, ie $572,336 ($715,420 X 80%).

26.  R also states A and J’s tuition fees in the sum of $35,120 as his liabilities but these should have been already covered by the $120,000 that R was entitled to utilize every month.  This sum would not be included.

27.  Parties’ failure to compromise has led to loss of family assets.  For instance, due to their failure to agree on the sale of the former matrimonial home, R had to liquate his pre-marriage retirement funds for maintaining the family.  For this R had to pay US tax at the rate of 24% but if he liquidates it by the age of 65, the tax rate will only be 10%.  Again, it was also because of the failure of the parties to compromise, or seen from R’s perspective, P’s groundless refusal to the use of the family assets, that R failed to pay his US taxes for 2013 and 2014 and thereby fees and penalties are levied; and as of now they are still going up every single day.  Leaving who is to blame aside, I can see why R harbours immense negative feelings towards P.  There is no challenge from Ms Tsui on the tax figures provided by R.  I see no reason why these tax liabilities should not be included in the matrimonial pot.

28.  Ms Tsui urges the court to look at the litigation conduct of R who instigated huge spending of legal costs on both sides.  She argues that the legal costs that R has already spent, which are in the region of $3,400,000, should also be added back for the reason that P also has her own legal cost liabilities.

29.  With respect, I do not see it this way.  As I observed in para 44 of my Judgment dated 27 February 2015 when I dealt with the proceeds of sale of the former matrimonial home, “… It is fair to say that the financial predicament that the parties are facing and will be facing in the years to come cannot be attributed to the wrongdoings of one side, after all, to use a well-worn cliché, ‘it takes two to tango’…”.  In my view, if P’s legal costs liabilities are to be included there is no reason why R’s legal costs should be excluded, subject to reasonableness in terms of the amount and the manner in which the same were incurred.  Also, it should not be forgotten that R was successful in his major application, ie the relocation issue.

30.  According to R, he still has legal costs of some $4,728,012 unpaid. 

31.  Based on the above adjustments, R’s assets and liabilities can be set out as follows:

R’s Schedule of Assets and Liabilities

Item no.	Assets	Amount (HK$)
1.	Colorado Home (net of mortgage)	2,227,000
2.	Bank balance under R’s control	663,700
3.	Valuables	2,738
4.	Retirement Funds ($933,952 is	1,153,900
	pre-martial)
	Total:	4,047,338
		========
	Liabilities
5.	US tax for 2013, 2014 and 2015	(843,723)
6.	Hong Kong tax	(46,684)
7.	Repair cost for Colorado Home	(93,000)
8.	Credit cards and HSBC personal loan	(572,336)
9.	Legal costs	(4,728,012)
	Total:	(6,283,755)
	Net:	(2,236,417)
		=========

32.  R therefore has a deficit of $2,236,417. Inclusive P’s net figure, the total deficit is $7,813,310 ($2,236,417 + $5,576,893).

33.  I have not forgotten the Net Proceeds that are now deposited in court.  As of now, the amount stands at $3,860,674. Inclusive of this sum, the family still has a deficit of $3,952,636 (-$7,813,310 - $3,860,674).  The family is effectively bankrupt.

Earning Capacity of the Petitioner

34.  P became a fulltime homemaker since she was pregnant with J in about November 2001.  Apart from being a licensed tour-leader in Japan, she does not have any particular skill or training.

35.  P has now been in Hong Kong for 10 years. She obtained her permanent residency in 2013 and she regards herself as having settled in Hong Kong.  She accepts her retiring age is 65, so she still has 28 years to go; much longer than that of R.

36.  P accepts that she should be able to earn about $18,000 a month.   This has not been challenged by R.  I accept this is what probably P should be able to obtain.  There is evidence that P was able to secure an employment in March 2011 with a salary of $18,000 per month.  I have heard P’s evidence on this matter in the relocation trial.  I have great reservation over her explanation that the “intended” employment was in fact not real and was just an attempt on the part of her friend to help her to obtain a visa to remain in Hong Kong.

Earning Capacity of the Respondent

37.  In contrast, R is an accountant qualified in the United States.  Being a qualified accountant and with ample experience, there is little doubt that he will be able to secure a decent job.  It is accepted by all that he is going to get a position that is commensurate with his qualifications and experience.

38.  R, now 54 years old, has about 10 years to go before retirement.  He expects to earn about $76,650 (or USD9,890) after tax per month upon return to the United States.  This figure has not been subject to challenge.  I would take this figure as R’s earning capacity.  His expected salary should be considered as an entry point with reasonable possibility of upward adjustments in times.  

Financial Needs of the Parties

39.  Before R was laid off the family used to enjoy middle class standard of living.  It was made possible only when R was paid about $205,000 as an expatriate by his former employer.  It is recognised by all that the previousstandard of living in Hong Kong cannot be maintained.  It is all a matter in the past.

40.  Both parties’ lifestyles have now been reduced to rather basic.  That said, I accept that as far as accommodation is concerned, with the Colorado Home, R is able to live in a larger accommodation but given the different geographical situation between the two places it is hard to make a sensible comparison. 

Financial Needs of the Petitioner

41.  P has made it clear that she will stay in Hong Kong.  R does not believe in it.  He still believes that she will go to the United States to join J and A.

42.  Wherever she is going to stay she needs a roof over her head.  For the purpose of the present proceedings, I proceed on the basis that she is staying in Hong Kong.  In evidence, she said she will try to terminate her existing tenancy in the Discovery Bay and move to a cheaper flat capable of accommodating J and A when they return for holidays.  The Sheung Wan area should be an appropriate location; it is closer to her place of work and convenient for J and A.  I consider this is reasonable.

43.  Taking into account the provision for travelling expenses for trips between Hong Kong and the United States for herself and the children, she estimates that she will need around $57,000 per month in total.  On the basis that she earns $18,000 per month, her shortfall is $39,000.

44.  She explains that in the past she used to have 2 return trips to Japan.  She now asks for 1 return flight to Japan at $7,000 per year only.  She also asks for $8,000 for her part of flight and accommodation for holiday with children in some places in South East Asia.  She considers it is good to have a trip every year with the children because they are not living together; she wants the children to have some happy memories with their mother.  R is to pay the children’s share of about $16,000 as well.

45.  She also expects to visit the children twice a year.  She rates it at $18,000 per trip for the air-ticket only.  At the same time, the children will return to Hong Kong 3 times a year.  All these are budgeted into her monthly need of $57,000.

46.  I will deal with holidays and seeing the children later.  In the meantime, suffice for me to say is that some of her items appeared to be on the high side. For instance, she says she needs clothing/shoes $2,000, personal grooming $2,200, entertainment $2,000 and medical/dental $1,500 per month.  In my view, these figures are unrealistic.  I doubt very much she is spending at these figures now. Furthermore, she would certainly spend much less on transportation, now stated to be $2,300, after she has moved away from Discovery Bay.

47.  Apart from the unpaid legal fees that are subject to the Legal Aid first charge, she has no other liabilities.  She has been paying the Director of Legal Aid her contribution $6,000 per month since June 2014. 

48.  P has been withdrawing $44,000 per month as her living expenses.  This also includes the living expenses of J and A when they were with her.  I consider that now living alone she would need about $13,000 as rentals and another $8,000 as other expenses.  On the top of this, I will add another sum of $500 for her return trip to Japan.  Thus, she requires $21,500 on a monthly basis.  She would need to spend more when the children return to Hong Kong or when she goes to the Unites States to see them.  I would factor in an additional sum of $25,000 for her trip to the United States and another sum of $5,000 per month, for 3 months, as the children’s additional expenses.  This would be a total sum of $40,000, or on average another sum of $3,333.  This means that she requires $24,833.  I round it up to $25,000.  The shortfall is therefore $7,000 per month.

Financial Needs of the Respondent and the Children

49.  Ms Tsui accepts that R has the obligation to support IY and the baby daughter but that does not rank above the needs of providing for P and the children.

50.  R agrees that he is moving to a lower cost area.  He did not give an estimate in his Form E of his costs of living in the United States.  In trial, R gave an estimate on the basis of his Hong Kong expenditure with 20% less to reflect the lower cost of living in Colorado.  At the end, he gave a total of $108,047, of which $34,000 being general expenses, $43,380 being his and IY’s personal expenses and the balance $30,667 being the children’s expenses.  I do not think these figures are realistic.  There is simply no evidence or basis for him to say that the cost of living in Colorado is 20% less.  What is more important is that the lifestyle or the mode of living and hence the costs structure would also be different between the two places.  One simply cannot compare an apple with an orange.  In any event, his figures are substantially much higher than what he expects to be able to earn.

51.  R says J and A need psychologist counselling to deal with their transition from Hong Kong to Colorado and he rates it at $6,000 per month.  I consider that this sum would not be required when the children leave.

52.  I accept that R has the onerous responsibility of supporting his household.  Leaving IY aside, he has 3 children to take care of.  In time when J and A becomes adolescents and the baby daughter grows older, their needs would increase.

53.  It is fortunate that the children will go to public schools which are free.  However, this would not be the case when they go to university.  P’s unchallenged evidence is that as of now the annual tuition fee for state university is about $171,000, so on that footing 4 years for both J and A will give a figure of $1,368,000.  

54.  I doubt very much that R’s father is earning any meaningful income.  However, R has not been supporting his father’s daily maintenance.  I would not consider giving contribution to the grandfather as part of R’s financial needs.

55.  R maintains that he has the need to save especially for his retirement.  I agree but it would only be possible if there is extra cash to go by.  

56.  As for P’s retirement, R relies upon a document that he found on the web issued by the Japan Pension Service of the Government of Japan to say that P is legible for pension payments upon her retirement at the age of 65.  He insists that this is the case even when P has never made any contribution and is always away from Japan.  As long as she enrols to the scheme and remains a Japanese citizen, she will get her pension paid.  To this, P accepts that she can enrol but she does not know whether she will get anything.  With respect, I am not able to be as optimistic as R.  I have read through the document carefully.  It is true that according to the document, Japanese citizens who are residing outside Japan are legible for enrolment on voluntary basis but enrolled members are required to make monthly contributions unless exemptions are granted. It is unclear as to whether someone who is residing outside Japan is legible for applying for exemption. Thus, the picture is not entirely clear.  It seems to me to be rather contrary to commonsense that one would still be entitled to receive benefits even if he or she is always away from home and has never made any contributions.  As R has the burden of proof in relation to his contention, I find he failed to prove on the balance of probability that P is entitled to a pension in Japan upon her retirement.

57.  One of his main reasons for relocation is that he is returning to his hometown where he should be able to manage with greater ease.  As said, he expects that he is able to earn $76,650 net of tax. I am entitled to take this as the baseline. 

58.  I consider that, though realistic figures are not available, the amount that R needs to provide for himself and the family in Colorado should be much less than that in Hong Kong.  There will be no need for expensive school fees and there will not be any rental expenses. The medical would be covered by R’s employer.  Their needs should be rather basic, so to speak - mainly food, household, utilities, car, some entertainment and also $15,000 monthly mortgage payment for the Colorado Home.  After deducting the monthly mortgage, R would still have a disposable income of about $61,650.  I have no doubt that R should be able to make his ends meet and should able to achieve a positive cash position.  As far as earning capacity goes, R has always been in a much better position.  This will also be the case in the years to come.  

Deciding to Apply the Sharing Principle

59.  Inclusive of the period of cohabitation since 2000 up to P’s divorce petition in June 2011, it is in reality a relationship lasting for 11 years.  This is not a short period of time by today’s standard and what is more, the parties have raised two children. Apparently, equal division should apply.

Whether are Good Reasons for Departing from Equal Division?

60.  Ms Tsui submits that the family assets are simply not sufficient for meeting their needs.  The parties may not need to go to the sharing principles.   There is no room for the application of any sharing principle:  see LKW v DD (2010) 13 HKCFAR 537, at para 74.

61.  It is on this basis that Ms Tsui argues that P should be allowed to keep whatever is left in the escrow money.  This is to meet her needs in the future and her legal costs obligations.  R has spent at least $3,400,000 from the matrimonial pot to pay his legal costs.  There is no reason why P could not get money to a similar extent to pay her legal costs.

62.  Ms Tsui emphasizes that P’s legal costs are estimated to be around $5,700,000 and assuming that some of the costs would be taxed off, she may still need to pay not less than $4,100,000 to the Director of Legal Aid.  P is now paying $6,000 per month as her contribution. When the matter is finalized, it is expected that she is going to foot the whole of the costs. 

63.  The Colorado Home was purchased pre-marital. Though mortgage payments were paid out of R’s income during the marriage, in my view, it is to a great extent non-matrimonial.  That said, P agrees to keep the Colorado Home intact for R and the children so that their housing need is taken care of.  This is a sensible approach.

64.  I agree that the parties’ needs are determinative.  This is the single most material factor affecting division of the family assets.  It is glaringly apparent that the assets available are insufficient to cater for the needs of both parties and given the long duration of the marriage, I see little point in differentiating assets into matrimonial and non-matrimonial.  There is also the implication that a ‘clean break’ would not be possible. 

65.  Also, I have not lost sight of the fact that with their liquid assets being stripped off, what are most readily available now are their respective earning capacities; and there is a huge disparity here.  R would have to provide P with periodical payments for her maintenance.

Alleged Misconducts

66.  Clearly R harbours a lot of bitterness from these proceedings.  He alleges that P has made numerous false claims including spousal and child abuse.  He was ousted by an injunction for no reason back in the early stage of the divorce proceedings. I agree that some of the allegations are unproven or groundless but they are not relevant to the present proceedings.  I have already dealt with those that are relevant to the relocation issue.

67.  Much time was spent by R during trial on exonerating his name: that he was not financially irresponsible and that it was P’s uncompromising conduct that led to the escalation of legal costs, thereby evaporating the family assets.

68.  R accuses P of being violent to him and to the children during the marriage, having an affair with her boy friend in 2010 and being responsible for destroying the marriage.  In contrast, he was totally committed to the family and even took care of the children when P was out with her boy friend.  In terms of contributions, he says they are not equal as regards the parties.  He has fulfilled 100% of his part but as for P, she has caused much damage to the family.  In addition to this, she has wasted a lot of family assets for nothing by taking out unnecessary applications to court, the most notable one being the said ouster order.  In brief, it was P’s unreasonable litigation conduct that has drained all the family assets.

69.  I have heard all the evidence on these issues in the relocation trial.  I do not find any of the misconducts, whether those of P or R, or taken in totality, could amount to “obvious and gross” conduct such that it would in the opinion of the court be inequitable to disregard it.  In particular, it may be that P was violent as claimed but according to R, it was due to her mental illness, suffering from depression and maladaptive personality.  If that is the case, I fail to see how this could be “obvious and gross” misconduct.

70.  R also makes the point that P did not understand the real financial situation of the family.  Further, in fact, there was and is no acrimony between the parties.  Due to the vulnerability of P because of her mental illness, she had the weakness of being easily exploited by people who would take advantage of her.  Before the involvement of her solicitors, the parties in fact had or nearly had an agreement on how to end the marriage.  It was only because of the involvement of P’s solicitors or since P had been granted legal aid that unfounded issues were created and dealt with in court.  Monies were spent on unnecessary correspondences and issues created by the solicitors who then solved them and charged the family assets.

71.  It is not necessary to express my view on these matters.  They are not relevant to the issues before me. 

72.  It seems to me clear that, for the time being, neither party would have the ability to save for their future retirement.  I however accept that R should be in a better position to save when he is on the right track again.  He should be able to have career advancement.  At the same time, of course, he has a much shorter time to save for the future but he already has retirement funds of about $1,153,900

73.  R has the Colorado Home.  This is a valuable asset.  It is safe to assume that its value will appreciate in the long run.  This is something that P does not have.  In evidence, R agreed that given that the outstanding mortgage is merely about $500,000 it is possible for him to obtain a re-finance for some extra cash but the term of the mortgage would depend on his expected productive life so he would only be able to get 10 years at the best but then the monthly payment would be huge.  To me, at least, he has something to lay his hand on in times of need.  R also has some positive cash in banks from which he can settle his credit cards and bank loan.

74.  As said, the crucial issue is on the division of the Net Proceeds. 

75.  I have no doubt that what I should do is to give regard to the welfare and the needs of J and A first.  R has the onerous responsibility of maintaining them and also the baby daughter.  He also has to save for their university education.  As said, Ms Tsui suggests to have a fund of $1,000,000 set aside for J and A’s university education. 

76.  Both parties are in agreement that J and A are expected to go to university.  Whilst agreeing to have a fund set up for the children, R considers that due to the conflicts and arguments the parties have it will be difficult to obtain a release of the funds.  I accept that on the evidence before me, it is indubitably that the parties are not able to work out any solution sensibly.  However, for the reason that J and A are staying with R in Colorado for most of the time, I do not think it is appropriate for the money to be held by P as proposed by Ms Tsui.

77.  I also agree that the children’s education needs should be catered for.  However, J and A are aged 13 and 11 respectively.  There are still roughly 5 years to go before J enters university.  Given the parties’ dire financial situation, I do not think it is prudent to have $1,000,000 locked-up for another 5 years.  Though J and A are going to public schools, I foresee that some expenses such as those for extra-curricular activities would still need to be paid.  The preferred way is to have the money available for J and A now to pay for their education expenses including their university tuition fees.  With this fund, R will be relieved of some of his saving obligations.  This in turn will allow him to pay periodical payments to P, to pay for J and A’s air-tickets for returning to Hong Kong and possibly to save for his retirement.

78.  As I have observed in para 176 of the Relocation Judgment, R impressed me as a loving and caring father.  However, as admitted by him in evidence, R utilized some of the monies held in the joint accounts with J or A for family expenses.  There is a risk that R may do the same with this $1,000,000.  I believe this can be safeguarded by way of a mirror order to be obtained by R from the relevant court of law in Colorado to which R has agreed.

79.  I will therefore give an order that a lump sum of $500,000 each (ie a total of $1,000,000) be paid out and released to R for the benefit of J and A solely.  The money shall be placed in a joint account with J or A (as the case may be) and I wish to stress that the money shall be used exclusively for their education expenses including university tuition fees.

80.  With $1,000,000 gone as education fund, the next question is how to deal with the balance of about $2,860,674.

81.  There is some force in Ms Tsui’s criticism over the lack of particularities on R’s outstanding legal costs.  In any event, R has already paid $3,400,000 out of the family assets.

82.  I agree with Ms Tsui that P should not walk out of the marriage with empty hands.  It is unfair to her.  She should be entitled to maintenance and be able to have some of her costs paid. 

83.  Since R already has the Colorado Home and the retirement funds, I consider it is fair that P should be given the remaining sum in court for her maintenance, inclusive payment of her legal costs.  The $5,700,000 is an estimate only.  It remains unknown as to what the actual amount would be after taxation, though it is highly likely that she may not be able to get anything. 

84.  I am conscious that the remaining sum is far from sufficient but this is the same for R.  It is a fact that they will never get sufficient money for their legal costs and livings and they knew this fact months ago.  Both should have thought twice before incurring the costs at the time.  I do not believe the court has an obligation to ensure that the Director of Legal Aid has his costs paid nor do I believe it is the best way to spend public money.   This case will certainly cause the Director of Legal Aid to go deep into his pocket.

85.  In J v J [2014] EWHC 3654 (Fam), [2015] 1 Costs LO 31, an English case where the legal costs went up to almost 1/3 of the family assets, Mostyn J said when learning this he was ‘almost lost for words’ and described the situation as ‘madness’ (para 9). He gave heavy criticism on excess litigation cost and called for reform.

86.  What we have here is even a more extreme case where as far as arithmetic goes, all the assets, whether matrimonial or non-matrimonial, have been eaten up by litigation costs.

87.  As I have analysed, R should be able to make his ends meet and achieve positive cash flow.  In time, he should also be able to save.  In contrast, P is in much worse position.  According to my assessment, P has a shortfall of $7,000 per month.  This shall be made up of by way of a periodical payment from R.

88.  At the very beginning of the divorce P took $500,000 from their joint account and put it in separate accounts for J and A. The money was later deposited in escrow with P’s solicitors in August 2012.  R complains that there is a total lack of information as to the whereabouts of the money from January 2011 to August 2012.  There is also a serious allegation against a partner of P’s solicitors in this respect.  I do not think I need to say any on this except that there is no basis in support of the allegation.  Be that as it may, the said $500,000 was left intact up to August 2012.  By June 2015 it was reduced to $53,688.  The money now being held by P’s solicitors on escrow should be of minimal amount if it has not been entirely depleted.  I consider it is fair that the balance, if any, be released and paid to P absolutely.

89.  P should also be able to keep her bank balance of $107,000 for rainy days.

Deciding the Outcome

90.  I need to step back and look at the overall impact of the factors found to be relevant.

91.  I have found that ‘needs’ of the parties are determinative.  I consider that I shall give regard to J and A’s needs first.  Their housing needs are to be ensured by the Colorado Home and their education needs are to be covered by the education fund.  R has a much higher earning capacity and better career prospect.  There should be a constant stream of income for his family and for the maintenance of P.

92.  As for P, she is in a less advantageous position.  Not only that there is a disparity in their earning capacity but also that R already has $3,400,000 for his legal costs and is keeping the Colorado Home and the retirement funds; so it is fair that P is to get a lump sum.  I am fully aware that this would not be sufficient for her needs.  As said, it is highly likely that she will get nothing at the end of the day.  It is also clear that P’s prospective income of $18,000 would not be sufficient for her maintenance and thus R should continue to provide her with a periodical payment. 

93.  This outcome may please neither party but, in my view, this is the best that can be devised in order to allow both parties to move on.

Further Care and Control Arrangement

94.  As A is approaching the age of 12, during trial the question of whether A should apply for his Hong Kong Identity Card was raised.  In order to provide A with an option, R agrees to give an undertaking to the court and to P that he will arrange and facilitate the application of A’s Hong Kong Identity Card at the earliest opportunity.  I will hold R onto this undertaking and this undertaking will form part of the order made in this judgment.

95.  The parties also agree that the court should give further directions regarding the care and control of the children during their holidays.

96.  According to my order dated 5 June 2015, the care and control of the children remains to be shared between P and R.  The children are to be under the care and control of their father during their school terms and under the care and control of the mother during their school holidays.  This arrangement is in accordance with R’s open proposal for the relocation trial.  R now clarifies that there is no Easter holiday in the United States and holidays longer than 2 weeks would be the Christmas break and the summer break only.  Given their young age, it would be too much for the children if they are to travel back and forth in a short period of time.  At the end, the parties agree that the children are to return to Hong Kong on holidays with not less than 14 days. Effectively, it would mean during the Christmas and the summer time. Of course, there is nothing to prevent P from having the care and control of the children during other holidays whether in Hong Kong or the United States and the children may be able to travel more when they become older.  In case of doubt, I wish to clarify that the petitioner’s care and control is not subject to approval by psychologist or psychiatrist and that R is to be responsible for J and A’s round-trip air-tickets for returning to Hong Kong.

97.  Finally, R has also agreed to obtain a mirror order from a court of law in Colorado on the same terms as the orders made regarding ancillary relief and the above care and control arrangement given in this Judgment.  Again, I will hold R onto his agreement by way of an undertaking to the petitioner and to the court; and this should be done within 6 months of the order.

Orders

98.  For the above reasons and upon the undertakings of the respondent set out above, I give the following orders:

1. A lump sum of $1,000,000 be released and paid out to R from the monies now being held in court for the benefit of the two children of the family, namely, J and A, with $500,000 for each of them;

2. R shall place the monies into two joint accounts, with $500,000 each.  One account is to be in the joint names of R and J and another account in the joint names of R and A. R shall only use the monies exclusively for the education expenses including university tuition of J and A;

3. R do pay P a periodical payment of $7,000 per month for the maintenance of P.  The first payment to be made on or before 1 November 2015 and thereafter on the 1^st day of each and every month during the joint lives of the parties or until the remarriage of the petitioner, which is the shorter;

4. After the payment out of $1,000,000 according to paragraph 1 above and subject to the First Charge of the Director of Legal Aid the balance of the money held in court be released and paid out to the petitioner’s solicitors or the Director of Legal Aid;

5. Subject to the First Charge of the Director of Legal Aid the balance of the escrow money now being held by P’s solicitors be released and paid out to P or the Director of Legal Aid;

6. The respondent is to return the children to Hong Kong on school Christmas holidays, summer holidays and school holidays with not less than 14 days, if any, for the petitioner to exercise care and control on the children. The respondent is to be responsible for the children’s cost of flights; and

7. The Order dated 27 February 2015 allowing for withdrawals is set aside.

Costs

99.  In Hong Kong, in general terms, apart from children’s cases, the starting point on costs in matrimonial and family proceedings, as they are in civil litigations, remain to be “costs follow the event”: Re Elgindata Ltd (No. 2) [1992] 1 WLR 1207; see also O. 62, r. 3(2) RHC.  This is different from the position in England and Wales where the “costs follow the event” principle has been removed in matrimonial and family proceedings as early as in 1999. 

100.  Recently in Z v. X & C, CACV 166/2011 (date of judgment:  8 March, 2013), Hon Cheung JA reaffirmed that costs should follow the event although because of the special dynamics of family litigation, the discretion may be broader than in civil matters generally: para 10 of the judgment.  The learned judge also commented that the changes in England were carried out by prescribed rules (which we do not have here) and the position in Hong Kong has remained unchanged.

101.  As regards the costs in ancillary relief cases, Hon Yuen JA sets out the principles in L v. C, CACV No. 169/2006 (date of judgment:  19 March, 2008): 

[23]As a matter of law, it is clear that costs are in the court’s discretion. Pointers as to how that discretion should be exercised include the following:

(1) in family cases, as in others, costs should normally follow the event;

(2) however because of the special dynamics of family litigation (e.g. where the case involved children, or where financial resources were inadequate to meet the needs of both parties, etc.), the discretion may be broader than in civil matters generally (Gojkovic v. Gojkovic [1991] 2 FLR 233, F v. F (No. 2) [2003] 3 HKLRD 977); …;

(3) the court also retains a discretion to deprive successful litigants of costs under the Elgindata principles (In re Elgindata Ltd (No. 2) [1992] 1 WLR 1207);

(4) where a litigant succeeds on appeal but only on a new point, the court can deprive him of the costs below (Farquharson v. Morgan [1894] 1 QB 552) or even order him to pay those costs (Yip Lai Fong v. Sin Tung Hing [2004] 3 HKLRD 230), and the court can deprive him of the costs of appeal (Chard v. Jervis (1882) 9 QBD 178).(emphasis added)

102.  Notwithstanding the starting point remains to be “costs follow the event”, it is important not to forget that the basic principle is that costs are in the court’s discretion. 

103.  In the present case, P has been successful in getting the balance of the money now held in court and in getting a periodical payment order, though the sum awarded is less than what she asked for.  Viewed from this perspective, P is more a winner than R.  However, for the reason that the family has essentially bankrupted and the financial resources are simply inadequate to meet the needs of the parties, in my view, the question of costs has become somewhat academic.  It is true that R will be working and thus there should be income available for payment of P’s costs, at least in part, but I also bear in mind that R has the onerous financial responsibility of raising J and A and maintaining P.  Considering all the factors in a round, I am prepared to exercise my discretion to give an order nisi that there be no order as to costs of the ancillary relief proceedings, including all costs reserved. P’s own costs to be taxed in accordance with the Legal Aid Regulations, with counsel certificate.  

104.  Lastly, I would also give the section 18 Declaration.

FCMC 7676 / 2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 7676 OF 2011

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__________________

JUDGMENT
(Relocation, Custody, Care and Control and Access)

__________________

The Application

1.  This is the trial on the respondent father’s application dated 3 December 2013 for leave to permanently remove the two children of the family from the jurisdiction of Hong Kong to his home in Colorado, USA.  He also asks for paragraph 2 of the consent order of 24 October 2012 (“the Consent Order”), by which he has sole custody but joint care and control, to be varied so that he has care and control, with access to the petitioner mother.

2.  The petitioner mother is in opposition to the father’s application.  On 28 February 2014, she responded by filing an application for variation of the Consent Order, seeking an Order for joint custody, with care and control to her and access to the father.

3.  The children in question are “J”, a girl born on 12 August 2002 (now 12 years and 10 months old) and “A”, a boy born on 21 June 2004 (now nearly 11 years old). 

4.  For convenience, in this judgment, I refer to the petitioner mother as “P” and the respondent father as “R”.

5.  This is a high conflict case.  Even with the assistance of their legal representatives, at least for the last 2 to 3 years or so, the parties essentially have had no ability to come to any resolution of their disputes.  From time to time there were applications before the court dealing with different matters.  On the more substantial ones, there was a hearing before Deputy Judge Own in August 2012 resulting in the children changing from a Japanese School to an international school, there was an injunction hearing on R’s retirement funds and the last substantial hearing was on the parties’ respective applications in respect of the proceeds of sale of the former matrimonial home.  It is quite certain that this judgment will not be the concluding note since the trial on the ancillary relief will be coming up soon.  

The Background

6.  P was born in 1978 and is Japanese.  R, a Caucasian American, was born in 1960.  They are now aged 36 and 53 respectively.

7.  R is a US qualified accountant.  In 2000, he was transferred by his employer to work in Japan where he met P in the same year and they married in Nevada in February 2002.  The children were born in Japan and they hold dual American – Japanese citizenship.

8.  In July 2005, R’s employer posted him to Hong Kong so the whole family moved to this territory. 

9.  There had been heated disputes between the parties throughout the marriage.  On several occasions, police were involved. In or around September 2009, a referral was made by the police to the Social Welfare Department, and counselling services were arranged for P.

10.  Beginning 2011, P attended sessions with a psychologist after being referred by her solicitor which she engaged in January 2011.  She also had sessions with one Dr Wong, a medical practitioner, to treat her depressions and stress.  She was prescribed anti-depressants at the time.

11.  It is the R’s case that he has been expressing concerns for many years about P’s emotional instability, and the way she loses her temper with the children, resorting not only to shouting, but to violence against them. She causes damage to property when angry.  It is fair to say that generally speaking though she does not deny these she has her own explanations; the main one being she was provoked by R.

12.  Around February 2011, R discovered that P had an affair.  P admitted she had a boyfriend since November 2010.  The relationship however was short-lived; it is now a matter in the past.

13.  P commenced divorce proceedings on 10 June 2011, on the ground of R’s unreasonable behaviour.  On 12 August 2011, an Amended Petition was filed, with a watered-down version of the particulars.  On 8 September 2011, the decree nisi was pronounced.

14.  On 15 November 2011, as a result of a dispute between the parties, P made an application to the court for a restraining order against R and for an interim custody order.  On 22 November 2011, an Order was made that R be restrained from molesting P and entering the matrimonial home, and that P was given interim custody, care and control of the children.

15.  On 29 November 2011, upon R’s submission of his undertaking not to molest P, the restraining order was set aside and defined access was provided to the parties.  R then returned to the former matrimonial home.

16.  On the same day, ie 29 November 2011, an Order was made to appoint Dr Levy as the psychologist of the children to address the issues related to their emotional and psychological well-being. The children and the parties attended sessions with Dr Levy for the period between December 2011 and March 2012, and a report was filed by Dr Levy on 9 April 2012.  A Social Investigation Report was also called for, to make recommendations on the custody arrangements of the children.

17.  In or around June 2012, P moved out of the former matrimonial home and set up her new home in the same neighbourhood.  It is R’s case that even before this time she had been spending considerable periods of time away from home, leaving the children in the primary care of the father.

18.  In or around August 2012, upon Dr Levy’s recommendation, it was arranged for the children to see another psychologist Dr Pon and to attend play therapy sessions to deal with the trauma that they experienced arising from the acrimony of the parties.  They have been seeing Dr Pon weekly ever since.

19.  Pursuant to an Order dated 31 August 2012, the parties appointed Dr Mistler, a clinical psychologist, to conduct a psychological assessment on themselves in the context of the contested application for custody care and control.  A report was filed by Dr Mistler on 12 October 2012.  I will come to this report in due course.

20.  Sometime later on 24 October 2012, by the Consent Order, R was given the sole custody of the children, with an order for joint care and control which essentially provides for an equal spilt of time over a 14-day cycle.  However, that was never implemented for the reason that the parties subsequently agreed that R is to have 9 nights and P is to have 5 nights in each cycle as follows:-

Week 1 and Week 3

The father would have the children from Sunday after 7:30 pm to Thursday morning; and

The mother would have the children from Thursday afternoon to Sunday at 7:30 pm

Week 2 and Week 4

The father would have the children from Sunday to Thursday morning and from Saturday after 7:30 pm to Sunday; and

The mother would have the children from Thursday afternoon to Saturday at 7:30 pm

21.  There is some dispute over how this arrangement came by.  R says it was recommended by Dr Pon but P says she unwillingly agreed to it because she did not want to go to court again.  I will deal with this dispute in due course.

22.  On 15 January 2013, R was informed by his employer - the very employer that sent the family to Hong Kong - that his employment would be terminated with effect from 15 April 2013.  He left his employment on or about 15 April 2013.

23.  Meanwhile, R has since 2012 commenced a new relationship and will marry his partner (referred to as “IY”) once these proceedings are over.  IY, a young Indonesian lady, moved to live with R and the children in the former matrimonial home in about July 2013 and she also gave birth to their daughter on 24 January 2014.  The baby is now nearly 1 ½ years old.

24.  Since his dismissal from his employment in April 2013, despite his attempts of securing a job in Hong Kong and in US, R has failed to obtain any permanent position.  He has been doing some part-time or temporary jobs earning much less than what he earned before.

25.  The 5-day trial on the ancillary relief was originally fixed to be heard on 6 December, 2013.  It was however derailed by R’s present application for permanent removal.  The trial has now been fixed to be heard commencing in June 2015 following the determination of the children’s matters. 

26.  Not surprisingly given the acrimony between the parties, on the children’s matters alone, both have filed at least 8 affirmations in support of their contentions.

27.  There are 4 Social Investigation Reports (“SIR”), the first two are on the custody issue while the latter two are specifically for the removal issue:

1.	SIR dated 21 December 2011;
2.	Up-dated SIR dated 12 October 2012;
3.	SIR dated 23 April 2014, following the R’s application for the permanent removal of the children and P’s application for variation of custody; and
4.	Updated SIR of 7th August 2014

28.  There is also an International Social Service Report (“ISSR”) providing an assessment on the home environment in Colorado. 

29.  The following expert reports have also been filed:

1.	Psychological Report by Dr Levy dated 9 April 2012;
2.	Psychological Report by Dr Mistler dated 12 October 2012;
3.	A Psychological Report by Ms Lim of the Social Welfare Department dated 23 April 2014; and
4.	An up-dated Psychological Report prepared by Dr Levy dated 30 September 2014

The Present Care and Control Arrangement

30.  The present arrangement is that R takes care of the children for 9 days out of a fortnight and the remaining 5 days go to P.  As said, this is not what was ordered pursuant to the Consent Order.  

31.  While staying with R, the children are being taken care of by R and his partner IY.  Before the sale of the former matrimonial home, the children stayed with their father and his new family there.  After the sale of the former matrimonial home on 30 December 2014, they have since moved to a rented accommodation in the same development. 

32.  As for P, she is living alone in a rented apartment in the same neighbourhood.  She is working part-time as a waitress in a Japanese restaurant in Causeway Bay during the days when she does not need to take care of the children.

33.  Thankfully, the care arrangement appears to have been running smoothly.

34.  The children are now attending an international school in the same neighbourhood. 

The Father’s Case

35.  R wishes to remove the children to return to his home in US.  Hong Kong was never his “home” and now the marriage is over and he no longer has a job here, he wishes to return home where he can establish a settled life for himself and the children.  He has a property there (“the Colorado Home”), bought pre-marriage in anticipation of returning to live there.  He also has his extended family there.

36.  R’s main reason is one of finance.  The reality is that he simply cannot afford to remain here where the costs of living are much higher than his home town back in Colorado. Although he had actively sought employment from April 2013 to March 2014, he was unable to secure a job in Hong Kong.  He has been undertaking accountancy work on a short term contract, with an income of HK$90,000 per month before Hong Kong and US tax.  This was way below what he got previously.  He has been unable to find an employment commensurate with his former work.  In light of his qualification as a US accountant, with no Chinese language ability and no experience working with either Hong Kong or Chinese regulatory or tax environments, he believes he will have a better chance to secure employment in US and be able to sustain the expenses of his family, including his new family.

37.  He is the primary carer of the children and is the parent who can give the children a settled home life and upbringing. Indeed, he says that he has been the primary carer of the children since about 2010 when P ceased spending the weekends with the children, left the matrimonial home on Saturdays and only returned on Monday mornings.  Further, around January 2011, P ceased living in the matrimonial home and moved her day to day important personal belongings elsewhere.  P would come to the matrimonial home in the morning to prepare the children’s lunch boxes whilst R would wake the children, bath them, prepare them for school and take them on the ferry to catch the school bus in Central. 

38.  He is extremely concerned about P’s ability to cope with the children on her own should he leave and the children remain here, given her emotional instability.  This has become one of the main issues in the trial of this application.

39.  R says he has a clear and settled plan for the children: 

1.	He would have the sole custody and care and control of the children, with free access to their mother;
2.	He and the children, together with his new family would live in the Colorado Home with his father, step-mother and step-sister who would assist him in providing care and support to the children;
3.	J would attend MR Middle School and A would attend SV Elementary School of the relevant school district, which are not fee paying.
4.	He would arrange for the children to attend universities in US upon their respective graduation from high school, with local rather than overseas fees.
5.	He would be responsible for the financial support of the children.

40.  R considers that his proposal provides the children with certainty and stability, extended family (grandfather, uncle, and cousins), clear plan for their educational future; and given the uncertainty of the P’s proposals, there will also be absence of the changes that they might be required to face in Hong Kong.  Further, if he is not permitted to remove the children, they will be without their father in their daily lives, as he has been as the primary carer over the years. 

The Mother’s Case

41.  P opposes R’s relocation plan.  She seemed to be putting forward a case that R is just using the employment or the financial reason as an excuse.  She does not believe that R could not find a job in Hong Kong.

42.  The children see Hong Kong as their home. They are simply not prepared to go.  They have been here since 2005 and have never lived in Colorado or anywhere in US except for holidays.  In fact, R left US for a long time, he has been working in Asia for over 15 years, first in Japan and then in Hong Kong.

43.  If R decides to return to US with his fiancée IY and the baby daughter, she is more than able to take care of the children in Hong Kong.  Of course, she would need financial support of the father but she is prepared to take up a full-time job to meet the family expenses.  She would hire a domestic helper to assist in caring the children, if necessary.

44.  In the event that R decides to stay in Hong Kong, she still wants to have joint custody with the father but with care and control to her for the reason that it is clear that the children dislike IY. She is also not happy with the care rendered to the children by R and IY.  They were sometimes left unattended to at home, even without dinner at the usual dinner time.  This is a serious change of circumstances which would warrant a variation of the Consent Order in the interests of the children.  She realizes that the children love their father equally so she would allow reasonable and generous access. 

45.  On R’s allegation of her emotional instability, she admits she was unhappy during the marriage.  She felt stress and indignation from the domineering and controlling attitude and behaviour of R.  She was depressed.  Her condition became worse shortly prior to her petition for divorce.  Since she has divorced, she is more relaxed and more confident now.

Evidence and Witnesses

46.  Apart from the parties, Ms Lim, the government clinical psychologist, Ms Cheng, the social welfare officer, IY and Dr Levy have given evidence in court.  Mr V, the grandfather, who was in Colorado, gave his evidence via video in the Technology Court.

47.  The evidence filed in this case is voluminous.  It is not possible nor is it necessary for me to deal with each and every of them.  Needless to say, some issues and evidence will be given more weight than the others but I wish to make it clear that for those issues or evidence that I have not specifically dealt with in this judgment, it does not mean that I have not given any regard to them.

What are the main issues to be considered?

48.  The following main issues fall to be considered:

1. Should permission be given for the two children to leave Hong Kong in order to relocate with their father to Colorado, US?

2. How should the children’s time be allocated between their parents once the relocation issue has been determined?

3. What orders should be made for custody, care and control, access and/or shared care?

The Legal Principles

49.  To start with, section 3(1) of the Guardianship of Minors Ordinance, Cap 13 (“GMO”) provides :

“(1) In relation to the custody or upbringing of a minor, and in relation to the administration of any property belonging to or held in trust for a minor or the application of the income of any such property-

(a) in any proceedings before any court (whether or not a court as defined in section 2) the court-

(i) shall regard the best interests of the minor as the first and paramount consideration and in having such regard shall give due consideration to-

(A) the views of the minor if, having regard to the age and understanding of the minor and to the circumstances of the case, it is practicable to do so; and

(B) any material information including any report of the Director of Social Welfare available to the court at the hearing; and

(ii) shall not take into consideration whether, from any other point of view, the claim of the father, in respect of such custody, upbringing, administration or application is superior to that of the mother, or the claim of the mother is superior to that of the father;

(b) …, a mother shall have the same rights and authority as the law allows to a father, and the rights and authority of mother and father shall be equal and be exercisable by either without the other;

50.  In relocation cases, our Court of Appeal in SMM v TWM (Child:  Relocation) [2010] 4 HKLRD 37 has confirmed the applicability in Hong Kong of the guidance laid down by the English Court of Appeal in Payne v Payne [2001] EWCA Civ 166, [2001] Fam 473. 

51.  There have been some debates in UK whether the guidance set out by Thorpe LJ in para 40 of Payne v Payne applies only to cases where the applicant is the primary carer.

52.  In Re Y (Leave to Remove from Jurisdiction) [2004] 2 FLR 330, Hedley J held that Payne v Payne is not to be applied in cases where the applicant shares the care of the children more or less equally with the respondent.  There was also the Court of Appeal judgment in K v K (Relocation:  Shared Care Arrangement) [2011] EWCA Civ 793, [2012] 2 FLR 880 (formerly cited as MK v CK) where Thorpe LJ approved of Hedley J’s analysis but Black LJ and Moore-Bick LJ took a different view.  Black LJ took the view that the decision in Re Y (Leave to Remove from Jurisdiction) was not representative of a different line of authority from Payne v Payne, applicable where the child’s care is shared between the parents as opposed to undertaken by one primary carer, but was a decision within the framework of which Payne v Payne was part, and exemplified how the weight attached to the relevant factors altered depending upon the facts of the case.  Cases should not become bogged down with arguments as to the label to be attached to the way in which the particulars parents had provided for the care of their children, which were, and should be, infinitely varied : paras 144 – 145. 

53.  In Re F (Relocation) [2012] EWCA Civ 1364, [2013] 1 FLR 645, Sir Munby LJ, after a careful analysis of K v K (Relocation:  Shared Cared Arrangement) also agreed with the majority view in that case that the guidance which Thorpe LJ gave in Payne v Payne is not confined to cases where the applicant is the primary carer.  It is guidance that may be utilised in other kinds of relocation case if the judge thinks it helpful and appropriate to do so:  para 45.

54.  More recently, in Re TC and JC (Children:  Relocation) [2013] EWHC 292 (Fam), [2013] 2 FLR 484, Mostyn J set out the governing principles derived from the authorities for a relocation application:

“10. The foundation of the jurisprudence in this field is the well-known case of Poel v Poel [1970] 1 WLR 1469. Although there were many other subsequent decisions of the Court of Appeal the next major milestone was the case of Payne v Payne [2001] EWCA Civ 166, [2001] Fam 473, [2001] 1 FLR 1052, where Thorpe LJ set out his memorable "discipline" in para 40. That decision was controversial, at least in some quarters, for arguably perpetuating a covert presumption in favour of location, at least where the application was made by the child's primary carer. It was reconsidered in 2011 in the case of K v K(Children: Permanent Removal from Jurisdiction) [2011] EWCA Civ 793, [2012] Fam 134, and the entire jurisprudence was recently summarised, and the modern principles enunciated, in a characteristically lucid judgment of Munby LJ (as he then was) in Re F (A Child) [2012] EWCA Civ 1364.

11. I have considered these four cases most carefully and, doing the best I can, I set out shortly what seem to me to be the presently governing principles derived from them for a relocation application:

i) The only authentic principle to be applied when determining an application to relocate a child permanently overseas is that the welfare of the child is paramount and overbears all other considerations, however powerful and reasonable they might be.

ii) The guidance given by the Court of Appeal as to the factors to be weighed in search of the welfare paramountcy, and which directs the exercise of the welfare discretion, is valuable. Such guidance helps the judge to identify which factors are likely to be the most important and the weight which should generally be attached to them, and, incidentally, promotes consistency in decision-making.

iii) The guidance is not confined to classic primary carer applications and may be utilized in other kinds of relocation cases if the judge thinks it helpful and appropriate to do so.

iv) The guidance suggests that the following questions be asked and answered (assuming that the applicant is the mother):

a) Is the mother's application genuine in the sense that it is not motivated by some selfish desire to exclude the father from the child's life?

b) Is the mother's application realistically founded on practical proposals both well researched and investigated?

c) What would be the impact on the mother, either as the single parent or as a new wife, of a refusal of her realistic proposal?

d) Is the father's opposition motivated by genuine concern for the future of the child's welfare or is it driven by some ulterior motive?

e) What would be the extent of the detriment to him and his future relationship with the child were the application granted?

f) To what extent would that detriment be offset by extension of the child's relationships with the maternal family and homeland?

v) Since the circumstances in which such decisions have to be made vary infinitely and the judge in each case has to be free to decide whatever is in the best interests of the child, such guidance should not be applied rigidly as if it contains principles from which no departure is permitted.

vi) There is no legal principle, let alone some legal or evidential presumption, in favour of an application to relocate by a primary carer. The old statements which seem to favour applications to relocate made by primary carers are no more that a reflection of the reality of the human condition and the parent-child relationship.

vii) The hearing must not get mired in taxonomical arguments or preliminary skirmishes as to what label should be applied to the case by virtue of either the time spent with each of the parents or other aspects of the care arrangements. ”

55.  In my view, the questions posed by Mostyn J are in substance the same as those identified in SMM v TWM (Child Relocation).

56.  Thus, I have to reach a decision on what is in the children’s best interests by weighing all the factors, identifying which factors are likely to be most important and attaching appropriate weight to them.

Should permission be given for the children to leave Hong Kong in order to relocate to Colorado, the United States with their father?

(1) Is the father’s application for relocation to Colorado genuine in the sense that it is not motivated by some selfish desire to exclude the mother from the children’s life?

57.  P says R’s relocation plan is aimed at hurting and punishing her.   The financial reason is just an excuse.

58.  She did not agree that the normal retirement age is 55 in established CPA firms in Hong Kong, that R has the impediments in not being qualified to practice in Hong Kong as a professional accountant and in not having Hong Kong or Chinese regulatory or tax environment, that the absence of Chinese language skill on the part of R is an disadvantage and that R has been out of formal employment for nearly 2 years which makes him less attractive to potential employer.

59.  She said R had taken some Chinese language courses.  She also gave evidence that she had read a lot of recruitment advertisements on the web and on newspapers and from what she heard from friends, she believed R could have found a job but she admitted that she did not send any of these advertisements to R or exhibit any of them in her affirmations and she further admitted that she had no knowledge of the contents of R’s previous job.  To me, this does not make any sense.  There is simply no basis for her to say that R could have found a job comparable to his previous one if she does not even know what R was doing. 

60.  R said he has to make the most of his earning capacity in the coming years to ensure that he can meet his obligations to his children and provide for his own future.  With his international experience he would have competitive advantage in US.  Again, P did not agree.

61.  It seems clear to me that P stands to oppose whatever R proposes. 

62.  R said he has no further ties with Hong Kong with his job, his home and marriage gone.  This must be correct. The fact that he has been doing a contract job earning $90,000 pre Hong Kong and US tax per month, which is much less than what he earned, is self-evident of his disadvantage.

63.  The parties are ‘true expats’ in Hong Kong. They came to Hong Kong in 2005 for R’s employment only.  I accept that now R’s employment has gone, he genuinely wishes to go home, that he is hindered by age as well as language ability and that his US CPA license does not permit him to work in private practice.  I have heard R and his father Mr V.  Both gave evidence that big corporations are moving from the Bay Area of San Francisco to Colorado.  His chances of finding an employment that is commensurate with his qualifications and experience are far higher in US where there is no language barrier and his international experience will be valued. I accept that he wants to go home where he has a house and his extended family members, schooling is free and the children can settle into a permanent home.

64.  I do not think R’s relocation application is intended to remove the children from P or to minimise her contact with the children.  That is not what Ms Cheng, Ms Lim and Dr Levy found.  Quite to the contrary, I accept that R is willing to facilitate the continual growth of the relationship between P and the children by proposing that P can have all the children’s time during their school holidays. 

65.  For the above reasons, I fail to see how this could be the case that R’s relocation is to punish and hurt P.  I am satisfied that his application for relocation is genuine. 

(2) Is the father’s application realistically founded on practical proposals both well researched and investigated?

66.  R’s plan is that he, IY, the children and the baby daughter will be living in the Colorado Home.  It is still subject to a mortgage and is presently being occupied by his father Mr V, his partner and his partner’s daughter who is 56 years old.

67.  The Colorado Home is 2,400 sq ft large with two stories, a finished basement and a two car garage; and each child will have a private bedroom.  It also has a front-yard and a back-yard.  The home is located in a suburban community with educational, medical, recreational and cultural amenities.  The Colorado Home is assessed by ISSR to be a safe, clean and spacious environment for the children to live with their family. 

68.  The grandfather Mr V said in his oral evidence that he might move out to live with somewhere else.  Either way, in my view, it is a suitable accommodation.  The children and also P prior to the marital breakdown had visited the place and stayed in the Colorado Home.  I accept that the children are familiar with the area and have extended family there.  The evidence shows that there were family gatherings in which the children also participated.  R has also identified the schools that J and A will be attending. 

69.  IY would provide the day to day care of the children; this is what she has been doing here in Hong Kong. 

70.  I accept that R’s relocation plan is realistic.

(3) What would be the impact on the father of a refusal of his realistic proposal?

71.  R has made it clear that regardless of the outcome of his application, he will return to Colorado with IY and their baby daughter anyway.  It is understandable as his primary case is one of finance. 

72.  After having lived with this case for nearly 1 ½ years and having heard and seen R’s evidence, I have no doubt that he is a good and loving father.  If his application is refused, though he may not be devastating, he will certainly be very unhappy and miserable. 

(4) Is the mother’s opposition motivated by genuine concern for the future of the child’s welfare or is it driven by some ulterior motive?

73.  I am sure that P genuinely does not want her children to leave.  She wishes to be able to ‘parent’ them, take care of them and see them as frequently as she does now.

74.  However, I am not so sure that P’s opposition is motivated by her genuine concern for the future of the children’s welfare.

75.  P did not agree that the Colorado home is a safe home or proper accommodation but she was not able to explain why.  Also, it must be the case that if the children are to attend the schools proposed by R, they would be on ‘through-train’ as local students to university.  It must be obvious to everyone that this is the case but surprisingly, she said she does not think so.  She even did not agree that schooling in primary and secondary school is free of charge because some schools are not free. Again, I fail to see her logic because it is not R’s proposal that the children are going to those schools.

76.  P came to Hong Kong because of R’s job. Seen in this light, she was brought to Hong Kong and in a way, she is now being trapped here.  It appears that Hong Kong does not have much to offer to her; she has only been able to work as a receptionist or a waitress in order to get some extra money.  Her extended family members, featured in the present applications are her mother and younger brother, are all in Japan.

77.  However, P said even if the children are to go to US, she would remain in Hong Kong on her own so that when the children decide to come back, she would give them a second home.  She is not considering moving to Japan with the children.  That said, in her affirmation, she listed out the education choices in Japan as an option.  In evidence, she explained that she just wants to show this is an option.  With respect, I fail to understand how this could be an option if she is not considering returning to Japan.  This reinforces my impression that P stands to oppose whatever R proposes.

78.  P did not agree with R’s financial analysis that he is not able to maintain the status quo by keeping 3 households.  Again, I fail to understand why she said so.

79.  Ms Irving submitted that P’s living expenses are $44,000 according to the Orders dated 15 May 2012 and 17 April 2013 plus school fees about $24,000 a month ($292,000 a year), so a total of $68,000 plus extra activities (eg Dr Pon’s sessions) now being paid by R.  Added to these is also an annual levy from the school, amounting to on average $6,700 per month.  It would mean $70,700 plus Dr Pon’s fees.  Further, if the children are to stay full time with the mother, the general expenses, such as food expense, would be more than what they are now.

80.  In response, P said if the children are with her and R is working in US, she would need roughly $60,000 which does not require the change of school and change to a cheaper accommodation.  Thus, according to P, with $60,000, less $24,000 school fees, $6,700 levy and $20,000 rentals, the monthly disposal sum would only be about $9,300 for 3 of them to cover all the other expenses.  I take what she means is she will be working to earn some extra cash because she mentioned that she could apply for tax allowance.  In Re-examination, she further accepted that if the children are to remain with her, their sessions with Dr Pon would have to continue.  According to P, Dr Pon would be willing to make some concessions on her charges.  At any rate, this would mean some extra money, probably a few thousand dollars. 

81.  P also gave evidence that if finance allows so that she does not have to work, she will take care of the children or works while they are away.  If she works, she may employ a helper but she has no ideas as to the sort of job she may be able to get.  She said she would like to have a job with flexible hours and with sufficient funding to hire a helper so that she may be able to take care of the children.  Later on, in re-examination, she said the type of job she has in mind is her current job, ie working in a restaurant.  She thought she could contribute $20,000. 

82.  She also mentioned that she prefers to have her mother to come over to look after the children but she accepted that her mother could only come as a visitor for 180 days.  It is an open question as to whether she is able to obtain any residency visa for the grandmother and there is also no evidence from the grandmother in support of that.

83.  She also assured that there are many choices in Hong Kong and there are a lot of different ways to solve the financial issue.  According to her calculation, she and the children can live in Hong Kong on their own.  She does not want a change in the life-style as it would bring emotional impact on the children but if needed she would do so, for instance, she would change to less expensive schools or to forego the existing club membership.  In any event, depending on what she is able to get, she would make the necessary adjustments. If R is not making any contribution, she thought she needs a minimum of $20,000.  She would change accommodation and schools.  She even raised home schooling as an option. 

84.  She also heard from friends that as a single mother, she could apply to the Government for single-parent allowance. When being asked by the court whether she meant CSSA, she said she had no idea.

85.  Despite P is adamant that she could make it, it seems to me clear that she has not given sufficient thought on the financial aspect.  What she said is completely unrealistic.  At the moment, R is earning a mere sum of $90,000 out of which he has to pay Hong Kong and US taxes.  It is clear that the family cannot be maintained on the current earnings. The objective fact is that the family’s liquid asset now being retained in court is being drained every month in maintaining the households and it will not be before long that the asset will be gone.

86.  She is now working part-time in a restaurant in Causeway Bay on every Monday, Tuesday and Wednesday and on alternate Sunday when the children are with their father.  She also works if the children are on holidays with R.  She works 8 hours a day for 14 to 15 days per month at an hourly rate of $66.  She previously worked full-time when her mother was in Hong Kong for about 2 months.  I reckon it would mean she is earning about $8,200 per month.  If she has to work full-time after R has left, she would need to employ a domestic helper.  It would mean further expenditure and larger living space to accommodate the helper.  It is also likely that they have to move to cheaper accommodation and to change to less expensive schools.

87.  I am convinced that her assessment is wholly unrealistic.  P does not have any idea as to the reality she is facing or as to what options are available to her.

(5) What would be the extent of the detriment to the mother and her future relationship with the children were the application granted?

88.  I am sure that P will be very unhappy if the children are to go the US because she would not be able to see them as frequent as it is now.  However, her relationship with the children could be maintained by generous contacts and in this regard, R has agreed that P could have the care and control of the children during their school holidays.  Given the long distance between Hong Kong and Colorado, this of course would essentially mean longer school holidays.

89.  Apart from face to face access, there are, among others, Skype and Face Time available for keeping the relationship.  The children are old enough to be able to fully utilize these media.

90.  In this regard, it is noteworthy that the grandfather has a very good opinion on P and is very positive in accommodating her visit for maintaining contacts with the children.

91.  Thus, though P may have some determent, she could still be able to maintain her relationship with the children.  

(6) To what extent would that detriment be offset by extension of the children’s relationships with the maternal family and homeland?

92.  The grandfather is 81 years old and his partner is 77.  He gave evidence that he does not see them to be involved in another family in the upbringing of the children.  He is not going to babysit anybody.  Like anyone else, the grandfather has his own opinion.  He holds a traditional view that P should take care of the children and R should take care of the money side.  That said, he confirmed he continues to be an affectionate and loving grandfather and will help them.  

93.  What the grandfather said is sensible and reasonable.  Though from what I observed the grandfather looks healthy, given the advanced age of the grandparents and together with the fact that he was diagnosed with cancer 3 years ago, it is wholly unrealistic and in any event would be too much for him if he is to take up any responsibility regarding the care of the children.  It would be sufficient and would benefit the children if the grandparents are around and close by and to give their love as grandparents. 

94.  I agree with Ms Irving that there is an extended family in Colorado.  The children have grandparents and cousins there.  They would have the opportunity to become part of a settled community there.  It is beyond doubt that the grandparents and cousins are no substitute for the mother but the detriment to some extent is offset by the extension of the children’s relationships with the paternal family and homeland.

Overall what would be in the best interests of the children?

95.  The above appraisals must now be brought into an overriding review of the children’s best interests as the first and paramount consideration.  There are a couple of factors that I need to consider.

The Role of R as the Children’s Carer

96.  There is some dispute regarding the involvement of the parties in the care of the children during the marriage.  P said all along she was the primary carer until she moved out in June 2012 but R said from around 2008/2009 P started to lose interest in handling household chores and looking after the children.  He thus started to take up more share in child care.  In 2010, she even stopped spending weekends with the family and started to stay overnight at friends’ place on and off.  It would appear that to some extent P agreed that this happened.  In the 1^st SIR, it was reported that P revealed to Mr Ma, the then social welfare officer, that she had a relationship with her boy friend since November 2010, that she usually met her boy friend on Saturdays and Sundays and sometimes slept over at his home and further that between June and August 2011, she had gone to her friends and boy friend’s place for sleep-over.  

97.  Be that as it may, I do not think this dispute is material; they were matters in the past.  What is material is the prospective arrangement for the care of the children.  For this purpose, I would give more weight to what has been happening regarding the care of the children.  The undisputed fact is that R has been taking care of the children for 9 nights out of a 14-day cycle.

98.  As I said above, this is not the arrangement under the Consent Order pursuant to which the parties were essentially given an equal split of the time.  There is some dispute over the reason for this change.  P said it was due to R’s insistence and threat of going to court again that she made the concession.  As for R, he said it was after his discussion with Dr Pon and it was upon Dr Pon’s advice that the parties agreed to change.

99.  From her evidence in court, it seems clear to me that the change was implemented after having discussed with Dr Pon in person, exchanges of emails amongst them, and finally it was agreed upon the advice of Dr Pon.  P testified in court that Dr Pon explained to her that since the children were going to an English school and their father was a native English speaker, the children should benefit from R’s involvement in this regard in the long run, and so she agreed to have the children stay with R during the weekdays.  In evidence, she expressly said that she accepted Dr Pon’s advice and the arrangement was good for the children.  Therefore, it is certainly not the case where she had no choice but to accede to R’s request. It is illogical and does not make any sense for her to say that the change was due to R’s insistence and threat.

100.  I consider that apart from being the custodian parent, R should be regarded as the main carer of the children. In coming to this conclusion, I must emphasise that I am not belittling the role of P or saying that she is not a care giver of the children.

The Social Welfare Officer (SWO)’s Evidence

101.  Ms Cheng said R impressed her as a person who knows very well to get along with the children.  He is a person with clear target and would try his best to achieve.  However, he may not be sensitive to the inner most feeling of the children.  As for P, she is more compromising. She is a caring mother and loves the children very much.

102.  Though Ms Cheng accepted that Hong Kong was never intended to be the permanent home of the parties, she does not support R’s relocation plan.  She has no problem with R’s arrangement in Colorado.  The heart of the issue is the children’s readiness to go. 

103.  In her 1^st SIR, she assessed that the children were not ready.  However, she said that once the children are ready and prepared, the relocation plan can be executed subject to further assessment on the circumstance.  She took the same view in her up-dated SIR, saying that while the 2 children were still ambivalent about the consequence of the relocation, maintaining the present care and living environment would allow more space for the children to adjust to the parents’ divorce and give more time for them to prepare for separation with either parent in future.

104.  If the relocation is refused, she would recommend the current care and control arrangement to be continued because the children want the status quo. 

105.  Probably out of abundance of caution, Ms Cheng was reluctant to give direct answers even to some simple and straightforward questions, especially from those raised on behalf of the father.  For instance, she was reluctant to give an answer whether or not she accepted that according to the R’s proposal, the children’s education in US would not require any fees.  In the result, much time was spent on extracting an answer from her.  Another example is whether she accepted the parties do not have extended family’s support in Hong Kong.  The answer was obvious to everyone but there was no direct answer from her.  The SWO’s role is to assist the court.  Very often a direct answer is what is needed.  It is never a matter of who gets it right or who gets it wrong. The ultimate goal is to find out what arrangement is to the best interest of the children. It is not necessary to be overly defensive, to do so would only undermine one’s credibility.  

106.  It appears that Ms Cheng’s conclusion was arrived on the basis of a false premises, ie the father could stay.  It is not mentioned or reflected in the reports that R indicated to Ms Cheng that he might not go.  Under cross-examination, at one point she said she did not ask the father whether or not he would stay but she believed he would consider the interest of the children because he loved them.  Then at another point, she recalled that R had told her that if the children were to stay he would not go.  Ms Irving was right to point out that this was not mentioned in the report.  Be that as it may, it seems clear to me that Ms Cheng did not support relocation because it is to the best interest of the children that the present arrangement is to be kept intact but regrettably this is out of the question. With respect, her recommendation is on shaking ground.

107.  I am quite sure that, in assuming that the father could stay, she also failed to consider the consequences on the children if they are not seeing the father on a regular basis as it is now.

The Children’s Views

108.  According to Ms Cheng’s 1^st SIR, both children wanted the status quo.  They wanted to stay with their parents in Hong Kong under the present arrangement.

109.  J was reported to have expressed that she did not want to move to US as she did not want to separate with her mother. She also said she disliked IY and she would be very unhappy if she had to live with her in US.  A also expressed similar view that he did not want to leave.

110.  That said, the children were found to have an intimate relationship with the father.  Both were attached to him and felt relaxed to stay with him.

111.  Ms Cheng reported in the up-dated SIR that whilst both children continued to hope both parents could live in one city, there was apparently a change in their stance.  J expressed that she still had hesitation to live with IY in US but it would appear that she was not that opposed to the plan.  She told Ms Cheng that she was in the middle to have a decision and that she might or might not go.  As for A, he was more inclined to go though it was reported that he did not reach a solid view.  Ms Cheng concluded that the 2 children were still ambivalent about the consequence of the relocation. 

112.  Ms Tsui submitted that there were manipulations from R to account for the change in the children’s views.  It was reported by Ms Cheng that R talked about the relocation with the children almost every day.

113.  On the evidence before me, it is fair to say that both parties have been trying to guide the children to make a decision in their favour as has been reported in Dr Levy’s report.  While P complained that R made the children write letters to the court in support of R’s application for a trip with the children to US in the summer of 2014, she exhibited J’s diaries as evidence in her affirmation to prove that J disliked IY.  P denied Ms Irving’s suggestion that she made her friends and their daughters to prepare all these materials in order to exhibit them in her affirmation.  On the evidence, I am satisfied that she orchestrated the exercise.  In my view, when the children wrote the letters they knew that the letters would be read by the court but when J wrote her diaries, she was confiding her views and feelings with her playmates, she would not have realised that P would have breached the confidence and exhibited the diaries as evidence.  To me, if R has to be censured for his acts, it would be more so for P.

114.  It is clear that both children are caught in the middle and think that their views are decisive.  They find it stressful to have the need to choose since they love both parents. 

P’s Emotional Instability

115.  R’s theme is that P is emotional instable and has anger management problem.  She is violent and short-tempered.  He is also concerned about the on-going physical discipline of the children.   This type of unpredictable behaviour leaves the children scared and confused, so they should not be left to P in Hong Kong.

Dr Mistler’s Report of 15 October 2012

116.  Dr Mistler, a clinical psychologist in private practice, prepared a report on 15 October 2012 on the parties when they were contesting on the arrangement of the children.

117.  It was reported that P suffered situational depression in 2011.  When P felt stressed and overwhelmed she tended to feel she could not cope and either lashed out in anger or withdrew (such as leaving home on weekends).  She tended to blame R for her anger outbursts, pointing at what she termed as his ‘harassment’ and indicating that she had been driven to these times of anger outbursts.  She did not demonstrate a great deal of insight about this pattern.  Her Minnesota Multiphasic Personality Inventory – 2^nd Edition (“MMPI-2 Profile”) reflected some maladaptive personality features that were likely to persist.  She tended to deny problems rather than confront them.   She might feel that others do not understand her, and she might tend to blame them for her problems.   She might also have some trouble with emotional control and, under stress, might have emotional outbursts. 

118.  Dr Mistler opined that while P dearly loved her children, she at times risked hurting the children with her anger outbursts and focused on her own pursuits.  She blamed these outbursts on R’s provocation.  Dr Mistler suggested that she should pursue proper treatment by having weekly sessions with a doctoral level psychologist or a psychiatrist. It was also suspected that P might have suffered from post natal depression and then continued in other forms over the last 10 years.

119.  R was also not without problems.  His MMPI-2 Profile showed that he was probably rigid and inflexible in his approach to problems and may not be open to psychological self-evaluation.  Dr Mistler also opined that R should also address his tendency to lash out when frustrated.  He might benefit from some therapy focusing on anger management strategies.  That would help him communicating with P.

Dr Levy’s Report of 30 September 2014

120.  Dr Levy, also a clinical psychologist, saw the parties and the children and submitted her report on 9 April 2012.  It was upon her recommendations that the parties were assessed by Dr Mistler and that the children have since August 2012 been receiving weekly play therapy from Dr Pon.

121.  In trial, the spot-light was on her latest report of 30 September 2014.  It was prepared by Dr Levy after having conferred with Dr Pon.  In other words, the report was essentially Dr Pon’s opinions based on her observations on the children.  It was so arranged in order to preserve the integrity of the therapeutic relationship with the children. 

122.  It was observed by Dr Pon that when both parents are present in her clinic, they are subdued and quiet.  The children would give R secret waves or winks as they leave with the mother.  The children informed Dr Pon that P would not like them to engage with their father and would be angry with them if they communicate with him in her presence.  In contrast, when R is present with the children without P, the children are cheerful, joke around, and laugh together with their father.  Despite having used many strategies and role-play with the children to help them build their capacity to stand up to P in this regard, the children have chosen to comply in order to avoid confrontations with P.  They did not attempt to do it because they were afraid that their mother would be angry with them if they did.  Dr Pon’s discussions with P have also led to little change.  On the contrary, it was observed that there was no disapproval from the father. 

123.  Dr Pon also observed that P tends to be more authoritarian and directive, whereas R is more likely to engage the children in discussion about issues that surface.  As a result, the children can be somewhat fearful of disappointing their mother due to her reactions and history of unpredictability when upset with them.  The children would often censor their true feelings and thoughts when interacting with their mother.

124.  It was also reported that A was slapped by P when he spoke with his mother about her refusal to permit them to take a trip to US with their father during the summer of 2014.  The up-dated SIR also has record that A was hit by P during the summer holiday of 2014.  J told Ms Cheng that P lost temper easily recently.  When she was angry, she would scold A and close the door loudly.

125.  On this, Dr Levy gave her own opinion that with such physical discipline, A may either censor his view or act out which might account for the foul language when he has just had enough.  There is also an underlying issue that the discipline happened because A wanted to do something with his father.  This would have discouraged him from wanting to spend time with R.  Dr Levy also made the point that according to her findings when she prepared her first report in April 2012 and from what she gathered from Dr Pon, the situation has not changed:  the children are afraid of telling the mother their true feelings.

126.  Dr Pon’s concern is that due to P’s open hostility towards R, the father will be marginalized from the children’s lives if they remain in their mother’s care.  The slapping of A also raised some concerns about continued physical discipline, her ability to self-regulate emotionally, and the underlying message that A’s desire to spend time with his father will incur anger and should be punished. 

Discussion

127.  The children have been receiving weekly play therapy from Dr Pon for nearly 3 years.  There can be little doubt that Dr Pon should be far more familiar with the children than Ms Lim and Ms Cheng who just saw them a couple of times; and the children have built up sufficient trust and rapport with Dr Pon.  

128.  P said she was shocked by the report.  She even claimed that Dr Pon apologised to her for some of the remarks in the report.  Upon the court’s inquiry, Dr Levy confirmed that Dr Pon had read the report and approved of everything before it was submitted.  It is hard to believe that should there be any grave errors or misrepresentation of facts, Dr Pon or Dr Levy, as professionals, would have allowed a flawed report to be presented to court. 

129.  Despite Ms Tsui’s greatest efforts, I do not think she has been able to undermine Dr Levy’s testimonies.

130.  P tried to downplay the situation by saying that there were only a few occasions when both parents were present in Dr Pon’s clinic.  It may be the case, but in my view, she missed the point entirely. The point is her expressed disapproval of the children to contact their father.  It was commented that P can be quite transparent about her feelings and very vocal as well as open in terms of her disapproval of R, even in the presence of the children.  If this happened while they were at Dr Pon’s clinic, there is no reason why this would not have happened when the children were with P during other times.  It was mentioned by Dr Pon that the children did not call R during their time with P.  Dr Pon viewed this as a significant issue. She is concerned about the impact that R’s relocation will have on his relationship with the children if they are to stay.  She saw that R would be marginalized due to the animosity directed against him. 

131.  In examination in chief, she denied she is violent and short-tempered but she did admit that she sometimes broke things such as the doors, the sink and the bed light that R mentioned in his affirmations.  She agreed that she had anger management problem even before coming to Hong Kong but she emphasized that she will no longer do it again because she is not living with R anymore.  She has sought help from professionals and is emotionally more stable now.

132.  Ms Tsui also stressed that these were matters in the past when the parties were living under the same roof. 

133.  P was cross-examined on the alleged incidents of emotional outbursts.  It is not necessary for me to deal with all of them here.  I only need to refer to the more recent ones.

134.  In around September 2007 when R returned home, he found the bathroom sink damaged.  He learned from the children that P was angry that day and threw a cup at the sink.  P admitted that it did happen when R was on a business trip.  It is clear that the incident was not provoked by R. 

135.  In 2008 P went into a rage over a trivial matter.  It escalated to a point where R felt the children and him were threatened.  He took the children into the master bedroom and locked the door for safety.  P repeatedly pounded on the door by using the metal pipe of a vacuum cleaner.  The metal door handle broke off due to the blows.  She admitted having broken the door to get the children, who were then 6 and 4. She agreed it was scary for the children.  In the context of a domestic dispute, plainly it was very violent.  Yet she said her attitude did not create more tension because it was not the behaviour from her only.  She agreed she did not cite any example of R’s similar behaviour in any of her affirmations. Ms Irving was right to point out that there was none in her affirmations.  I am sure that if there were, P would have said these.  Her explanation that she just wanted to move on with a new life with the children and so she did not state R’s behaviour is simply unbelievable.  It was put to her that this is a classic example of denial.  She disagreed.

136.  Finally, P admitted she threw a wooden bowl towards the floor on 18 May 2011.  In her affirmation, she explained they were arguing and R once again succeeded in making her upset and angry.  Essentially, she said she only did this because she was cornered by R.  It seems to me what she meant was it had happened naturally.  That said, she agreed she did something bad in front of the children and the fighting might have hurt the feelings of the children. 

137.  Dr Mistler’s assessment has never been challenged.  As a matter of fact, P tried to say she has followed Dr Mistler’s advice.  However, it is clear that she has not been facing her problem.  She attributes her problems to living with R but clearly it is not what the reports said.  On her own evidence, P has just taken some random counselling.  Ms Lim also gave her view that P did not follow the advice of Dr Mistler to receive proper therapy and this causes her concern.  Surely, the problem would not simply go away together with the marriage.

138.  I consider there is no reason for me to ignore the concerns raised by the psychologists.  The concerns are certainly valid and pertinent to the relocation issue.  Ms Lim agreed that P attributes her responsibility to the father and she agreed it is an important concern that P has not been able to contain her temper.  Given that P now stays with the children 5 nights in 2 weeks, if she is to have the children all the time, Ms Lim agreed that R must be right to be concerned about P’s emotional stability.  Thus, I cannot agree with Ms Tsui that I can dismiss the concerns for the reason that they are matters in the past. 

139.  As I referred to above, there is evidence suggesting that she is still bad tempered and may outburst to the children under stress.  This is a real concern especially when she is to take care of the children singlehandedly without support from the extended family.  

The relationship between the children and IY

140.  IY is a prominent figure whom I should not ignore.  Not only that she is part of the father’s new family but she also plays a pivotal role in the taking care of the children. 

141.  P says she has a very close bonding with the children.  She can see that the children are not happy.  They have explicitly aired that they dislike IY.  Thus, going to US and being forced to live with IY is not in the interest of the children.  

142.  A step-mother is someone who was a stranger but has, very often suddenly, become a member of the family.  Commonsense tells me that it is always a difficult ‘job’ to be a step-mother, especially when she has to perform in many aspects the role of a mother.  It is particularly more difficult if the natural mother is around and is still heavily involved in their living.

143.  I believe the children’s relationship with the fiancée has genuinely improved since the 1^st SIR on relocation.   That has been so reported in paragraphs 18 and 24 of Ms Cheng’s 2^nd SIR.  Para 24 said as follows:

“…While the father was carrying the baby, (A) asked for carrying the baby (ie their half-sister) too. The Father let (A) to carry. (A) told that he liked playing with the baby while (J) also told that the baby was cute. While (A) was asked whether he had confidence to carry the baby firmly, he said that he had confidence to do so as he always carried the baby at home. The father’s fiancée smiled at the children during the whole process. In general (J) and (A) had interactive communication with the father and their relationship was harmonious too”.

144.  As conferred by Dr Pon, A has opened up and has been vocal about accepting the baby sister; and J has ultimately accepted IY and the baby sister and she was observed to have positive interactions overall with IY.  The children and IY are able to engage well with each other. Dr Pon made the point that R has also made an effort to integrate IY into therapy so that they could learn how to deal with the children and make them feel more secure.

145.  R has produced some photographs on the interactions between the children and IY.  The photographs show the children looked relaxed and comfortable with IY.  For instance there are photographs showing that the children were happy and at ease when they were ferrying to the downtown or playing on the beach.  P challenged this by saying that the children were told to be happy and to wear a smiling face otherwise R would get angry.  However, clearly there are pictures taken when R was not present.  P’s version is too simplistic to be true.  I do not accept that the children wore a smiling face simply because they were told to do so.

The Care of IY on the Children

146.  IY came to Hong Kong as a foreign domestic helper.  She has been able to stay with the family because R ‘hired’ her as his helper.

147.  IY’s evidence regarding her former marriage and her daughter who is now being taken care of by her former husband is not entirely satisfactory.  That said, I accept that if the children are to relocate to US, IY will be doing the same household chores that she is now doing: cooking meals and looking after the children.  By and large, these have been done satisfactory.  In saying so, I have not lost sight of the fact that P was fast to complain that there was at least on one occasion when the children were said to be left unattended to at home and J was being late for a school trip. Meanwhile, R also spared no time to point out that while A was under the care of the mother, he was knocked down by a golf-cart while he was on his way to school.

148.  In my view, IY and R should be able to provide sufficient care to the children if relocation is allowed.

The relationship between P and IY

149.  P described her relationship with IY as difficult.  Given her open disapproval of R, it is no wonder that she also disapproves IY.  There is no doubt that the relationship between P and IY was stressful and strained.  There used to be much hostility between the two ladies but the hostility appeared to have ceased since March 2014 due to R’s intervention.  It is hopeful that once the relocation issue is settled, their relationship should be less stressful.

Should the father be allowed to relocate to Colorado with the children?

150.  Much has been said criticising R for not consulting Dr Pon or P on how he should have broken the news of the baby sister to the children, for introducing too many changes to the children arising from his new relationship with IY, the new family and the new baby sister, for being insensitive to the feelings of the children, for being inflexible, unnecessarily insistent and arrogant and for always saying that P is sick and is with mental problems.  I agree that R has his own shortcomings; but the same for P.   Both have their strengths and weaknesses.  This is the reality that the children have to live with.

151.  I am satisfied that despite their different parenting styles, both are capable parent in giving adequate care and control to the children. As evident in the first 2 SIRs where it was recommended that the joint custody, care and control was to be given to both parties.  The then SWO, Mr Ma, was of the view that both had shown ability to take care of the children independently.  Though the reports were prepared not for the purpose of the present relocation application, in my view this would not alter the validity of the observations.  Ms Cheng also considered that both are equally capable parents.  I agree.  So far apparently there has not been any particular problem arising from the present care arrangement.  This situation would continue to hold true when both are in Hong Kong.  I must now consider who is in a better position to provide for the care of the children when R relocates to US.

Marginalization

152.  Clearly, Dr Pon’s greatest concern is the marginalization of R.

153.  If the children are to stay with their mother, given the open hostility and disapproval on the part of P, I doubt very much whether P would be willing to promote an ongoing relationship between the children and their father and R would be able to enjoy the same or similar contacts with the children.  In this regard, I note that J was reported to have told Ms Cheng that she had difficulty in contacting the father while under the care of her mother.  She also informed Ms Cheng that she wanted to live with R on a large proportion base and her brother A also expressed that he wanted to live with his father more.  Ms Lim also mentioned in her report and confirmed in evidence about P’s subtle disapproval of the children contacting R when they are with the mother and she agreed there is no such disapproval on the part of R.

154.  I agree with Dr Pon that the children will run the risks of losing most of their contacts with their father. Needless to say, this would have adverse impact on the children.  Conversely, there would not be such a risk if they are to stay with R.

155.  Dr Pon also made the point, and I think this is important, that the parties have very different parenting styles which happen to complement each other.  Given that R is more likely to be conducive to the maintenance and growth of the children’s relationship with the other parent, it is also more likely that the balance of different parenting style can be maintained if the children are to stay with R. 

Uncertainties

156.  Same for any relocation case, there are bound to be uncertainties in what lies before the parties.  Indeed, this happens not just to relocation cases.  It is the reality that, to a greater or lesser extent, one has to face.  Thus, the question is not one of uncertainty; the question is whether the relocation is well planned and considered so that the major adverse uncertainties are foreseen, avoided or eradicated as much as possible.  

157.  Ms Lim considered that if the children are to move to US, there will be a lot of instability.  They have to adjust to members of the extended family and new family rules, social network, friendship and culture.  I have no argument with Ms Lim on this but it seems clear to me that she made no reference to how the children could cope with the long distance relationship with their father.  At the end, she accepted that the children would miss their father very much.

158.  Moving to Colorado will be a change for the children, but they know the house, the environment and the family members. Once they have undergone the transition, they will have a settled, stable home in which they will remain until they grow up.  I agree with Ms Irving that there would be a period of adjustment leading to long term stability. 

159.  Even if the children are to remain in Hong Kong with P, there are bound to be changes that are no less significant than the changes they may face in Colorado.  The most significant change would be the loss of R in Hong Kong.  It is also likely that they would have to change their school, which represents a significant change for them both in terms of their schoolings and peer groups.  They may have to change to cheaper accommodation or even to another neighbourhood.  I incline to agree with Ms Irving that if the children remain in Hong Kong, there is uncertainty about almost every aspect of their lives.

160.  Extended family support is important especially in times of change and stress.  It is particularly so for P who can be emotionally unstable.  P does not have any extended family in Hong Kong.  It is true that sometimes friends can be supportive and can play the role and P did mention that she has some friends but little is known about her support network in Hong Kong.

161.  Although when Ms Lim prepared her report she did not have the benefit of Dr Levy’s report, she had already made the point, in para 10.6 of the report that, if P is to take care of the children singlehandedly, she has to be very sensitive about maintaining her own emotional stability.  In her evidence, Ms Lim also admitted that when she prepared her report she did not have the information that A was slapped by P when he forgot to do his homework and the children were scared. She agreed that P’s emotional stability is a concern for her.

162.  Thus, there is evidence that the children continue to report P’s angry outbursts.  If this happens when she has less than half of the time with the children, it would mean they would be subject to a higher risk if they are with her full-time and under stressful situation occasioned by the changes. 

163.  As for R, it has been commented by nearly all involved in the assessment of the parties that he is seen to be emotionally more stable.  To me, this is a trait that is of particular relevancy when the children will be facing uncertainties and ups and downs. 

164.  It is worthy to note that Dr Pon indicated that the children have demonstrated a great deal of improvement and growth in recent years.  They are likely to be adaptable and resilient, and will be able to cope with a new environment such as relocation would entail.  The children will likely be able to flourish in a supportive environment where they are able to experience stability and low levels of conflicts with an extended family network to support them.

Financial Reality

165.  The financial reality is that R simply cannot afford to remain here.  According to R, the cost of maintaining the 2 households in Hong Kong as well as his US obligations amount to over $164,000 a month.  Each month assets are depleted to make up the shortfall between what he currently earns and the family spending.  Schools fees alone are HK$17,320 according to the Form E filed on 26th February 2013 with total children expenses given as $45,120, not including their share of household/general expenses.  It is not difficult to understand why R says moving to US will ease the financial burden considerably, as well as provide the children with settled continuity of life.

166.  For P, as I have demonstrated, it is not clear how she envisages meeting the cost of living in Hong Kong.

The Intended Relocation to New York in end of October 2010

167.  There is also one small point but I have to be rather lengthy on this.

168.  I accept R’s evidence that, as a matter of fact, back in October 2010, R’s employer was minded to relocate him to New York.  There were emails from R in October 2010 to P providing information about schools in New York.  These emails clearly show that he raised the issue of relocation to New York at that time but P insisted that she considered these emails as providing information to her only.  In cross-examination, at one point she even said she had no recollection of these emails.  I must confess that I fail to understand her logic.  Anyway, she admitted that after she had made up her mind to divorce R, she wrote to him informing him that she did not know whether it was correct for the whole family to move to New York.

169.  In her affirmation in support of her ex parte application of 10 June 2011 to restrain R from removing the children out of Hong Kong, she said she first heard of R’s plan in December 2010 when R asked the children directly in front of her.  In her petition dated 10 June 2011, she also alleged that R “makes plans for the family to move without any consultation with her”.

170.  Ms Irving was right to point out that the petition was subsequently amended to delete that paragraph but P said she did not totally agree to the amendment.  She agreed because she wanted to move on.  I have no hesitation in finding that she did not make full disclosure about relocation to New York when she made her ex-parte application and she was not telling the truth when she insisted that R did not consult her.  She did not impress me as a frank and truthful witness.

171.  R also produced an email written by P to the grandfather Mr V on 23 January 2011 informing him that she was not going to stay with R anymore and would not go to New York.  That was after the family’s visit to the grandparents during the Christmas of 2010.  The relevant part of the email is as follows,

“I AM SO SORRY to tell you this, but I am not going to stay with (R) anymore. I will not go to NY, I think I have to go back to Japan…I wanna take kids with me but I cannot destroy nice relationships between (R), (J) and (A).

They love each other so much, and I am not there.

I know that is why which is I am not a good mom.

I know it is my fault and this is life so I have to deal with it,

But I am breaking down.

I drink everyday (sic), smoke, cry… I am gone.

I have to find myself again and be happy and make kids happy again.

Right now, even I am with (J) and (A), I am not there.

My mind and heart is not with them.

I think they can feel it and it is NOT good for them to see crazy mom like me.

Honestly, I think I can live without kids… I don’t know if I love them according what i do to them.

I have no right to say I love them because the way I do to them.”

172.  When being confronted with this email, notwithstanding that this email has been disclosed for 3 years since April, 2012 and its authenticity has never been challenged, P said she did not send it out and she could not find it in her account.  

173.  It is common ground that at that time P started a relationship with her boy-friend.  There is evidence that P was finding herself a job and a flat for her alone. There was a letter dated 18 March 2011 from her prospective employer seeking approval for P’s employment from the Immigration Department.  It was a full-time job requiring P extensive travelling.  P’s explanation is that since at that time she was staying in Hong Kong on the strength of R’s visa, her friends helped her out by issuing the letter so that she might apply for a visa on her own but in fact there was not such a job opened to her.  Essentially what she said is her friends concocted with her in submitting false information to the Immigration Department.  She later realized that it was illegal and she withdrew her application.  

174.  As regarding engaging a real estate agent looking for an appropriate flat in the neighbourhood for her, she also has her explanation.  She was doing research on what she could get with a budget of $10,000 to $15,000 if she were to move out with the children.  She wanted to know the kind of household she would be getting if she divorced.  In this respect, Ms Irving challenged that she also viewed some 1 bedroom flats.

175.  Against this background, putting all the pieces together, it is wholly understandable that back then she might have decided for one moment that she was not going to live with the children.  I accept that now the situation has changed, she has returned to be a caring and loving mother as before.

176.  In contrast, R impressed me as always being a loving and caring father.  Even when he had a new relationship and then a new family with IY and the baby daughter, he has never ceased to be a loving and caring father, has never given them up and has been fighting for relocating with them.  It is glaringly apparent that R is more dependable.

177.  After having taken all these factors and concerns into consideration, I have no doubt that the balance is favour of relocation and this is the order that I give.

Custody

178.  As far as custody, care and control is concerned, the principles which have been set out in the Court of Appeal judgment in PD v KWW [2010] 4 HKLRD 191

Joint Custody: the proper approach

52. Today, although there has been no change in our law similar to many other common law jurisdictions, orders of joint custody are in no way exceptional.  This is because it is accepted that, in principle, such orders are in the interests of children.

53. In all but the most exceptional circumstances, the effect of divorce on the children of the marriage, especially children of tender years, is deeply felt.  In all but the most exceptional circumstances, such children desire that they should continue to be protected and guided by both parents.  The case before us is an example.

54. In the result, in the best interests of the child, the fact that, as a result of the breakdown of the marriage, relations between the parents are strained is not of itself a reason to refuse to make a joint order of custody.  Nor is the fact that the parent to be given care and control does not agree.  Such orders look to the future.  They will govern a limited area of exchange between the parents, albeit one of the greatest importance.

55. Accordingly, the issue for the judge is whether, with the court proceedings concluded, it is reasonably anticipated that the parents will be able to agree on the questions of importance that will determine the upbringing of their child, both recognising that, as difficult as it may be for them, this process of co-operation is in the best interests of the child.

56. In determining this issue, the judge is entitled to proceed on the presumption that competent, loving parents possessed of sufficient objectivity to be able to make rational decisions in the interests of the child will be able to co-operate with each concerning matters of importance in the upbringing of the child.

57. At all times, of course, the welfare of the child remains the first and paramount consideration.  As this Court has recognized (see, for example, Y v P [2009] HKFLR 308), there may be occasions when the ability of the parents to reach any rational accord in respect of important matters concerning the upbringing of their child is so deeply undermined that to compel attempts at co-operation will not protect the interests of the child but only leave the child more vulnerable. (emphasis added)

179.  It has been submitted on behalf of P that she always wants to be involved in the upbringing of the children, that in respect of the Consent Order she made greater concession by agreeing to ‘sole’ custody be given to R, that at that time she had no idea of R’s new relationship with IY and that she would not have consented to the Consent Order had she known of the relationship.  It may well be the case but as I see it what I should look at is the present circumstances and the prospective arrangement of the children.  Parental rights exist for the benefit of the children but not for the benefit of the parents.

180.  I believe what happened in the past speaks for itself.  It is crystal clear to anyone involved in this family that the parties have no intention and no ability to communicate and work anything out sensibly for the benefit of the children, at least for the time being.  I am fully aware that, as has been pointed out by Hon Hartmann JA (as he then was), there is a thin line between sole custody and joint custody only: PD v KWW (Joint Custody, Care and Control), at Para 41.  I have no doubt that P is a loving and caring mother and very much likes to be involved in the upbringing of the children but for reasons that I have set out, I am of the firm view that giving joint custody of the children to them would not be in the best interest of the children. 

181.  Thus, R should continue to have the sole custody of the children.

Care and Control

182.  R proposes that if his application for relocation is granted, the joint care and control remains to be shared between the parties.  The children will live in US with him during their school terms and they will live in Hong Kong with P during their school holidays.  It strikes me to be a sensible approach.  Of course, if the children are to fly back to Hong Kong they would only be able to do so in longer holidays such as during the summer, the Christmas or the Easter.   In any event, in my view, the contact will be substantial and meaningful.  The children would have probably at least 1 or 2 months’ time to live with their mother during the summer. Alternatively, or in addition, P may also visit the children in US.  It is not in dispute that Japanese passport holders do not require a visa for visiting US and are allowed to stay for 90 days.

183.  J is in puberty and will soon become an adolescent.  P, as her mother, should continue to play an active and indispensable role in her upbringing.  IY is not a complete substitute.  Of course, I have not lost sight of the need of A to maintain a close relationship with his mother too.  In allowing R to relocate, I have taken this into consideration.  Putting all the factors in the balance, I am still in favour of letting the children go.  There would be sufficient arrangement in place so that the mother and the children relationship could remain close and intact.

184.  There will also be free telephone access or through other electronic means such as Skype or Face Time with the parents who at the time is not with the children.

Orders and Conclusion

185.  For the reasons aforesaid, I conclude that R’s proposal is in the best interests of the children. I give the following orders:

1. Leave for the respondent to relocate permanently with the children of the family to Colorado, the United States of America;

2. The sole custody of the children remains with the respondent;

3. The care and control of the children remains shared between the petitioner and the respondent;

4. The Order dated 24 October 2012 be varied as follows:

(1) The children are to be under the care and control of the respondent during their school terms;

(2)The children are to be under the care and control of the petitioner during their school holidays.

5. Parties do have free telephone access or through other electronic means such as Skype or Face Time with the children when they are under the care of the other parent.

186.  As for costs, given that this is a child related matter, I make an order nisi that there shall be no order as to costs, to be made absolute at the expiration of 14 days.  There shall be certificate for counsel.

187.  Lastly, I gave some criticism on the way in which R handled the retirement fund in my judgment dated 22 November 2013 but they were on financial matters only.  R impressed me as a loving and caring father as can be seen from the perseverance that he has demonstrated in pursing the relocation application.  Now that the children’s matters have been concluded, it is hopeful that the parties may be able to sensibly consider their financial disputes so that the last bit of family asset may be saved for the benefit of their children.

FCMC 7676/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 7676 OF 2011

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__________________

JUDGMENT
(Injunction)
__________________

The Applications

1.  This is a high conflicting case.

2.  The background of the parties can be found in an earlier judgment dated 22 November 2013 when the court dealt with an injunction upon the application of the petitioner wife to restrain the husband from the disposal of his retirement funds. 

3.  There are 2 summonses before me, both in respect of the sale proceeds of the former matrimonial home (“the MH”), which was in the sole name of the respondent husband.

4.  By way of summons of 26 September 2014, the petitioner wife wishes to restrain the respondent husband from dealing with the proceeds of sale, which have been paid into court following the completion of sale on 30 December 2014.  Essentially, she wishes all the proceeds be retained in court against her claim in the ancillary relief proceedings.

5.  The respondent too has filed a summons on 8 December 2014, seeking permission to make various payments out of the proceeds, including the sum of US$32,504 for payment of overdue US taxes (“the US tax”), and $2,800,000 for payment of his legal fees for his relocation application in the present proceedings (“the Legal Costs”).

6.  By an Amended Order dated 10 December 2014, various aspects of the respondent’s summons have been dealt with.  Hence, the petitioner’s Notice of Intention to Proceed with an Application for Ancillary Relief was vacated from registration against the MH at the Land Registry so as to allow the respondent to complete the sale.  By the same order, it was also ordered that, in brief, the whole of the net proceeds of sale be paid into court pending the final determination of the ancillary relief matter or until further order, whichever is the earlier.  This was agreed to by the parties. Leave was also given for the parties to withdraw funds from the court for their maintenance. 

7.  Consequently, what remained for the court to deal with are:

(1) para 5 of the respondent’s summons relating to the US tax and the Legal Costs; and

(2) the petitioner’s application for injunction.

8.  Out of the total proceeds, apart from the necessary costs incidental to the sale and the redemption money, the respondent has used the initial deposit of $200,000 as legal costs.  By her summons, the petitioner is also seeking the disposition of this $200,000 be set aside.

9.  As of today, the amount now retained in court is about $6,049,146.

The Petitioner’s Case

10.  During the hearing, Ms Tsui, on behalf of the petitioner, accepts that the US tax needs to be paid and further that the respondent needs to pay his legal costs.  Thus, given these concessions, if I may call them, as far as the petitioner’s case is concerned, the remaining dispute boiled down to what should be the reasonable amount of the legal costs to be released.  In this regard, she reminds the court that what the respondent is asking for is the payment of the outstanding costs for the relocation and custody litigation only.  This already amounts to $2,800,000 and does not include (1) the costs previously incurred when the respondent was represented by another firm of solicitors and (2) the costs to be incurred.  Given that the trial on the children matters will be continued in March, which has been estimated to be 5 days, and the 6-day trial for the ancillary relief has now been scheduled to commence in June, there will certainly be further applications coming up for further payment out for costs.  She warns that there will not be sufficient money left to cover the petitioner’s legal aid first charge and the parties’ living expenses.  If the respondent’s application is granted, about $3,000,000 will be gone.  Bearing in mind that any sums awarded to the petitioner will be subject to the first charge of the Director of Legal Aid, it means that essentially the petitioner will be left with nothing.  Further, what is now in court is around $6,049,146, this is essentially what is remained within the jurisdiction of this court.  This amount would hardly enough to satisfy the petitioner’s claim.  There is a real risk here when the respondent is very determined to leave Hong Kong.  He indicated during the relocation hearing that he would leave even if the court would not allow the children to go with him.  It is therefore important that the remaining family assets in this jurisdiction are protected before the relocation hearing.

11.  In contrast with the situation of the petitioner, the respondent would still have his assets in the United States, being his Colorado House which is worth about $2,138,000 and his US pensions in the region of about $1,215,000, totalling $3,353,000.

12.  She also argues that the sale of the MH amounts to an unjustified disposal of family assets and the release of $2,800,000 is in essence a capital-redistribution.

The Respondent’s Case

13.  Ms Irving, counsel for the respondent, agrees that given the petitioner’s latest stance, the Mareva injunction and the section 17 application are not relevant anymore but they demonstrate the petitioner’s mindset.  Prior to the hearing, nothing has been heard from her regarding the concessions. 

14.  Ms Irving submits that the respondent is not making the disposition with the intention of defeating the petitioner’s claim for financial provision.  Given the fact that the respondent seeks only to pay his own liabilities, and that he has kept the petitioner and the court informed throughout by making the proper applications to court stating his intention, the suggestion that his intention is to defeat her claim is unsupportable.  There is virtually no evidence in this regard.  There is no reason why the respondent wants to pay money to his lawyers instead of to the petitioner.  Therefore, the petitioner’s section 17 application must fail.  

15.  As for the Mareva injunction, its purpose is not to set aside funds for the petitioner.  The basis of Mareva injunction is fraud.  There is no risk of dissipation of assets on the part of the respondent.  All he intends to do is to use the funds for paying his tax on income which has benefitted the family and for paying his legal costs.  The respondent is entitled to pay his own debts otherwise he will be sued.  There could be significant consequences on him as a US qualified accountant.  The petitioner simply fails to show the dissipation of assets on the part of the respondent. 

16.  Also, there has not been any misconduct by the respondent.  He has been keeping his job and maintaining the children and the petitioner.  He is just coming to court for the sanction of use of his own money.  There is nothing apprehensible.

17.  Although the petitioner’s summons is expressed to be under section 17 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“the MPPO”), it is in reality a pure Mareva injunction, not merely preventing a “wrongful disposition”, but preventing any use of the funds in question.  It is clear that given the history of the issue, there has never been any intention on the part of the respondent to defeat the petitioner’s claim, but only an intention to pay his bills.  The petitioner does not have a case of getting 100% of the assets and she also does not have a case that her claim in ancillary relief comes before the respondent’s right to discharge his debts and meet his legal costs, to the extent that all assets should be subject to an injunction.

18.  She further argues that costs in children cases as a matter of law and practice are deducted before the asset pool is established by Step One of LKW v DD (2010) 13 HKCFAR 537 at the date of ancillary relief final hearing.  The $2,800,000 legal costs now requested to be released are for the respondent’s costs incurred with his current solicitors, being costs of the CDR and the fully contested child custody proceedings.  They are already outstanding.  There will be further legal costs of about $800,000 in the up-coming trial of March.  There may not even be sufficient money to run the remaining of the relocation trial and the ancillary relief trial.  She frankly points out that there would be nothing left for the ancillary relief but this is the reality and the parties have to face it.  The present case is certainly not the first case with such a situation in the Family Court.

19.  That said, she accepts that there are assets in the United States but there are also liabilities there.  Furthermore, the Colorado house will be the home for the children.

20.  She also relies on L v K (Freezing Orders:  Principles and Safeguards) [2013] EWHC 1735 (Fam), [2014] Fam 35 and the Court of Appeal judgment in JRB v KLWW, CACV No. 28/2011 (date of judgment:  27 June 2011) to argue that the petitioner’s application is flawed in that the correct formalities have not been observed, in particular there are no undertakings as to damages from the petitioner.

21.  In a nutshell, the respondent is entitled to the full payment of $2,800,000.

Discussion

22.  In the last hearing of 10 December 2014 the parties agreed to have the proceeds of sale paid into court pending the determination by the court as to their disposal.  The assets have been retained so in a way the injunction prayed for by the petitioner either has been dealt with or is no longer necessary.  Ms Tsui agrees this to be the case.

23.  It is important to note that even on the terms of the respondent’s summons, he is not seeking for the release of or the liberty to make use of the whole proceeds of sale in whatever reasonable manner he sees fit, whether for living expenses, legal costs or otherwise.  By para 3 of the summons, the respondent prayed for the payment into court of the net proceeds of sale pending the final determination of the ancillary relief matter or until further order, whichever is the earlier; and by para 4, he asked for leave for the withdrawal of funds from the court for the payments of maintenance to the parties.   These have already been dealt with by way of an Amended Order dated 10 December 2014.  It is also in the same order that the petitioner was ordered to withdraw her Notice of Intention to Proceed with an Application for Ancillary Relief so that the sale could proceed to completion.  

24.  Now that the US tax is no longer in issue, I need only to deal with the Legal Costs.  Ms Tsui argues that the respondent should be given a reasonable sum only while Ms Irving argues that the respondent is entitled to the whole of $2,800,000.  This is the issue in dispute.

25.  To start with, there is some force in Ms Irving’s argument that the petitioner has the benefits of a team of legal representatives from legal aid while the respondent does not. The respondent should not be deprived of proper legal representation for a fully contested child custody and relocation hearing.  I have no argument with Ms Irving’s submissions that the respondent is entitled to pay his legal costs, and that per se, the respondent is not doing it with an intention to defeat the petitioner’s claim.  I am fully aware of the petitioner’s concern that she may be left with nothing, whether the children will remain with her or not.  However, this may be the reality if the parties chose to spend their monies on litigation rather than on some other purposes.  That said, in my view, it does not then follow that the respondent is entitled to have all his legal costs, whatever sums they are, to be paid out from the proceeds of sale.   

26.  It is beyond dispute that the MH is the only asset left in Hong Kong, the other substantial assets being the respondent’s house in Colorado and his US pensions.  The reality is there are some $3,353,000 worth of assets which are outside the jurisdiction of this court.  In my judgment, it would be wrong for me not to take these assets into account in considering the present application.  Looking at the figure alone, this would be more than sufficient to cover the Legal Costs.  The MH, once illiquid, has now become liquid assets.  There is nothing before me as to why the same cannot be done in respect of these overseas assets, for instance, whether any borrowing by way of a charge on these assets could be done.  This is a question that I raised in the hearing.  In this regard, it should be noted that all along the petitioner’s application is not one for a worldwide Mareva injunction.  Her eyes are on the proceeds of sale of the MH only, which have already been dealt with.

27.  To me, it would be an affront to the sense of fairness and justice if at the end of the day all the liquid assets in Hong Kong are evaporated with only those outside the jurisdiction remain intact, leaving the petitioner with an empty judgment.

28.  The petitioner states her highest claim is in the region of $6,118,000 while the respondent says it is only at about $2,400,000.  I do not think I need to express my view on this for the purpose of the present application.  

29.  As mentioned above, the amount now retained in court is about $6,049,146, together with the overseas assets of about $3,353,000, this would mean in the region of $9,402,146.  The parties are drawing monthly expenses pursuant to an order dated 17 April 2013 under which the respondent gets $120,000 (inclusive $20,000 as legal cost provision) and the petitioner gets $44,000.  The petitioner gets no legal costs provision because she is on legal aid.  Since the parties are earning some income now, the monthly drawdown is about $50,000.  Assuming that it takes another 10 months to conclude the ancillary relief, it would mean another $500,000, leaving about $5,500,000 in court; this, together with the overseas assets and leaving the family debts and liabilities aside, would be in the region of $8,853,000, half of it is $4,426,500.

30.  The court has been informed by Ms Tsui that the costs incurred by the petitioner up to the end of the part-heard trial on relocation were about $4,174,000 and it is estimated that her total costs up to the conclusion of the ancillary relief trial should be about $5,000,000.  This is of course a ballpark figure and is subject to taxation.  Nevertheless, to me, at any rates this is already out of proportion in terms of the assets owned by the family.

31.  I believe that as an antagonist in the same set of proceedings, the petitioner’s figure should be a good reference point.  Even on the assumption that the respondent at the end of the day will have incurred more or less the same amount of legal costs (ie a total of $5,000,000), this would mean the family assets by then would not be sufficient for the parties’ legal costs.  Not only that the parties will be left with nothing, the children also will have no money for their maintenance and even if they are to relocate to the United States, they will also be without their home in Colorado.

32.  I am told that the respondent has incurred about $2,600,000 when he was represented by another firm of solicitors. According to his Schedule of Assets and Liabilities (Exhibit “VRJ 17-2”), there are still some $621,000 outstanding.  As far as arithmetic goes, it means the respondent has already paid $2,000,000.  Apart from this, there are no further particulars.   On the other hand, for the reason that the petitioner is legally aided, she is yet to pay hers.  Further, as mentioned above, on the top of $2,800,000 now under application, Ms Irving has informed the court that the respondent would need another $800,000 to complete the relocation trial. Leaving the trial on ancillary relief aside, this would mean a huge sum of $6,200,000 ($2,600,000 + $2,800,000 + $800,000).   

33.  The respondent, and for that matter, his legal advisers, should be well aware of his means before incurring his liabilities.  This is quite different from his liabilities under the US tax. The respondent has provided to court a Statement of Account (Exhibit “VRJ19-1”) but it lacks helpful particulars.  The parties’ legal costs must be reasonable and proportional in light of the means of the parties and the complexities of the case involved.  Any excessive or out of proportion legal costs may not be capable of justification.  

34.  In considering the present application, I think it is fair that the respondent should have an equality of arms and so $5,000,000 should be a right figure.  On the assumption that half of the overseas assets could be liquidated, this would mean $1,676,500 ($3,353,000 ÷ 2).  Having regard to the facts that he has already paid some of his legal costs, that there might have been some duplication of work due to the change of solicitors, that he has also been drawing and will continue to draw a monthly sum of $20,000 as his legal costs and that he has already obtained the $200,000 from the initial deposit, doing the best I can and taking a board brush approach, I would allow a payment out of $1,000,000.

35.  I have to make it clear that I should be slow to allow further applications for payment out absent some significant change in the circumstances and good reasons.

36.  Ms Irving argues that undertakings as to damages from the petitioner are required as the present injunction affects third parties.  Despite the fact that the petitioner now agrees to the payment of the US tax, there is still a third party, ie the respondent’s solicitors, who would be affected.  Hence, an undertaking is still required.

37.  I do not agree.  First, as I see it, this is an application on the part of the respondent for the payment out of an appropriate amount for his legal costs.  He has other assets that he may resort to in satisfaction of his legal costs.  Secondly, even if this is in effect a freezing order, this is not one which is capable of embracing all of the respondent’s assets up to a specified figure so that it is essential that all the principles and safeguards are scrupulously applied: L v K (Freezing Orders:  Principles and Safeguards), at para 51.

Orders

38.  For the reasons aforesaid, I give the following orders.

The Petitioner’s Summons

39.  I only need to deal with Para 5 of the summons.  For the reason that I have already taken the $200,000 initial deposit in the calculation of the amount of payment out, Para 5 is dismissed.

The Respondent’s Summons

40.  I grant leave for the respondent to withdraw from the monies paid into court the following payments:

1. US$32,504 for payment of the respondent’s overdue US taxes and costs of transfer;

2. $1,000,000 for payment of his outstanding legal fees and his costs of the upcoming child custody and relocation hearing.

Costs

41.  With the concession made by Ms Tsui during the hearing that the issue is on the reasonableness of the legal costs to be paid out, it is crystal clear that the petitioner’s stance maintained by her throughout that the proceeds of sales were to be paid into court for the maintenance of the parties is unsustainable.

42.  Given that the respondent was laid-off in April 2013, all along since at least the end of 2013, the parties have realized that the MH needs to be liquidated as soon as possible in order to meet the final needs of the family.  The parties diverged only on how the proceeds of sale should be handled.  Broadly speaking, the petitioner’s position has been that the whole of the proceeds of sale be paid into court pending the determination of the ancillary relief claim.  At one time when the parties were negotiating on this issue and before the respondent entered into the provisional agreement for sale and purchase on 20 September 2014, the petitioner on 5 August 2014 had asked for $3,000,000 to be paid to the Director of Legal Aid to protect DLA’s First Charge.  It is of no surprise that the demand was not acceptable by the respondent.

43.  In my view, in the absence of an agreement between the parties, the petitioner cannot be criticised for taking out her application.  On the other hand, the respondent, by his application, has his own proposal as to how the proceeds of sale are to be dealt with.  Seen in this light, he cannot be criticised too.

44.  It is sad to see that although both parties recognised their situation was critical and that the MH had to be sold, it seemed they consciously preferred to see both of them and their children starving and the family assets go to legal costs rather than to work their way out sensibly.  Both parties are pointing their finger against each other as to how and why the present applications have been brought up.  Both are blaming the other side for wasting time and most importantly, legal costs, which for sure have been eating into the already fast shrinking family assets.  Sadly these complaints have led to nowhere but only served to generate further costs. It is fair to say that the financial predicament that the parties are facing and will be facing in the years to come cannot be attributed to the wrongdoings of one side, after all, to use a well-worn cliché, “it takes two to tango”.  As I see it, given the animosity and high level of conflicts between the parties, probably these might have adversely impacted on the communications between those representing them.  Thus, the way in which the proceedings have been turning out is no surprise.  It is perhaps pertinent for me to refer to the remarks made by the Court of Appeal in T, L v S, N, CACV No. 196/2009 (date of judgment:  19 October 2010),

“10.  As the Judge had remarked, this case was “bitterly fought and highly emotional … where feelings were clearly running high throughout, both as between the parties themselves and their legal advisers”. In view of the hostility and deep distrust that existed between the parties, their legal advisers should have taken a more dispassionate stance so as to focus on the real issues in a realistic way. And instead of each putting his or her case at the highest, the interest of clients would be better served if legal advisers had firmly advised them what was sought to be established in litigation might be achieved at wholly disproportionate costs, and might not overall be in the family’s best interests. The information provided to the Judge was that the parties had spent HK$5 million between them on legal costs within two years, a substantial drain of their assets by any standards, and, as the Judge had remarked, left R with virtually no financial security.”

45.  For the reasons aforesaid, I consider that the proper costs order for both summonses is no order as to costs; and I so order by way of an order nisi, with counsel certificate.  The petitioner’s own costs to be taxed in accordance with Legal Aid Regulations.

Ms Jennifer Tsui, instructed by Howse Williams Bowers, solicitors, appeared for the petitioner (on the instructions of the Director of Legal Aid)

Ms Frances Irving, instructed by Oldham, Li & Nie, solicitors, appeared for the respondent

FCMC 7676 / 2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 7676 OF 2011

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J U D G M E N T

(Injunction)

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The Applications

1.  I have two summonses before me, one taken out by the petitioner wife (“P”) and the other by the respondent husband (“R”).  The two summonses are essentially the two faces of the same coin.  By her summons, P seeks to restrain the husband from disposing of his retirement funds and R, in response, applies for court’s sanction for the use of the funds.

Background

2.  P is Japanese and is now aged 35; and R, an American, is 53 years old.  They met each other in about 2000 in Japan when R was working there.  They cohabited shortly after meeting and married in February, 2002.

3.  Two children were born from this marriage.  The elder is a girl, now aged 11 and the younger is a boy, aged 9.  They are now studying in an international school in Hong Kong.

4.  R is a professional accountant and auditor.  The couples moved to Hong Kong in 2005 when R had to work for his employer “XX” here.

5.  In June, 2011, P petitioned for divorce on the ground of R’s unreasonable behaviour. 

6.  Notwithstanding that the decree nisi was issued as early as on 3 January, 2012, the parties have not been able to resolve the remaining matters but have since been engaging in a series of legal battles regarding their children and financial matters.  

7.  As far as the children are concerned, the matter was originally set down for a 5-day trial, but fortunately the parties finally were able to come to an agreement on the day before trial.  Thus by a consent order, the sole custody of the children was given to R and their care and control was given to P and R jointly, such that the children are to spend their time equally with the parents.

8.  As for the ancillary relief, it took another 6 months for them to come to the FDR hearing on 17 April, 2013 but regrettably it failed.  This court was then seized of the jurisdiction to deal with the present proceedings.

9.  In the PTR hearing of 26 June, 2013, the trial on ancillary relief was set down to be heard commencing from 6 December, 2013, with 5 days reserved.

10.  In the meantime, R was laid off by MS.  His last day of service was 15 April, 2013 and he was due to receive certain sums including severance payment in the sum of $1,250,000 from XX upon the termination of his employment.

The said Consent Order

11.  During the FDR hearing of 17 April, 2013, despite the failure to come to a final settlement, the parties however were able to agree on how the funds of the family, in particular the funds that R was due to receive upon termination of his employment, were to be dealt with pending trial.  For the sake of completeness, I set out the relevant part of the consent order dated 17 April, 2013 (“the said Consent Order”),

“AND UPON the undertaking of the Respondent and the Petitioner to each other and to the Court that:

A. They both acknowledge that the sum of HK$500,000 currently held by the Petitioner’s solicitors, Messrs Howse Williams Bowers, was removed from the joint account by the Petitioner and placed in the names of children and has subsequently been held by the Petitioner’s solicitors pending resolution of ancillary relief matters.

B. They will continue to utilise the sum of HK$500,000 on an emergency basis in the following way:-

(a) HK$250,000 has been released to the Respondent’s solicitors, Messrs. Hampton, Winter & Glynn, and the Respondent’s use of such sums shall be accounted for with documentary evidence provided to the petitioner’s solicitors on or before the PTR hearing.
(b) HK$250,000 has been released from escrow to the Petitioner’s solicitors, Messrs. Howse Williams Bowers, and be solely utilised for honouring the Respondent’s undertaking under Recital B(2) of the Order dated 15 May 2012 to make available HK$44,000 per month from the joint account for February, March and April 2013.[1]The remaining balance shall be accounted for in writing within 7 days and remain in escrow with Messrs. Howse Williams Bowers.

C. The Respondent undertakes, if he has not already done so, to notify and irrevocably instruct his former employer, (XX), forthwith of the restriction herein as to his dealing with any stock or options presently held in his name until further order:-

(a) 50% of the 2011 Deferred Bonus Award (HKG) (grant date 20 January 2012), amounting to USD18,227
(b) 2010 year end award (HKG) (grant date 21 January 2011), amounting to USD6,541.56
(c) 2011 year end award (HKG) (grant date 20 January 2012) amounting to USD23,512.20
(d) (XX) Private Wealth Management Account 016xxxxxx

D. In the unlikely and unanticipated event that the Respondent seeks to release the severance payments from the escrow account as defined in Paragraph 2 below, he shall seek consent from the Petitioner in writing or an Order of the court.

E. The sum referred to in Paragraph 2 below shall be utilised as follows:-

(a) HK$200,000 to Messrs. Hampton, Winter & Glynn for partial settlement of the Respondent’s outstanding legal fees;
(b) HK$44,000 pursuant to Recital A(1) of the Order of Deputy District Judge Own dated 15 May 2012 with effect from 16 May 2013;
(c) HK$100,000 to the Respondent per month with effect from 16 May 2013 to provide for his undertakings contained in Recital B(1) in the Order of Deputy District Judge Own dated 15 May 2012[2]and for the payment of inter alia mortgages, management fees, rates & rent, living expenses and HK$20,000 per month towards his legal fees.

BY CONSENT IT IS HEREBY ORDERED THAT:-

1. …
2. The Respondent do forthwith, if not already done so, irrevocably instruct his employer XX to pay his entire severance payments including but not limited to HK$1.25 million or whatever sums ultimately paid out by his employer in satisfaction of termination payments (“severance payments”) which shall include Recital C(a), (b) and (c) and (d) abovedirectly to his solicitors, Messrs Hampton, Winter & Glynn, and all such sums shall be held by the Respondent’s solicitors, Messrs. Hampton, Winter & Glynn in an escrow account until further Order.
3. …
4. The Pre-trial Review Hearing be set down to be heard on 26 June 2013 at 9:30am in Court No.9.
5. …” (emphasis added)

12.  As a matter of fact, earlier on there was already a consent order dated 25 March, 2013 (“the 1^st Consent Order”) dealing with the same subject matter on more or less the same terms.  I gather that by the time when the parties came to the FDR hearing, since R’s position in relation to his termination had become clearer, they saw it fit to enter into the said Consent Order in place of the earlier one.

13.  As can be seen from Recital A of the said Consent Order, there was already a sum of $500,000 deposited with P’s solicitors and the said sum was agreed to be utilized in the following manner:

1.	$250,000 for the use of R;
2.	$250,000 was released to P’s solicitors for her living expenses in the sum of $44,000 per month for the months of February, March and April, 2013.  Hence, a total of $132,000 (ie $44,000 X 3 months).

14.  As for the stocks and options referred to in Recital C,  I am told during the hearing that $121,071 has been vested and is available for use, the second batch of $142,638 will be vested this month and a final batch of $160,000 will be vested in February, 2014.  In his affirmation, R said he has placed the same with a broker with restrictions as to dealings according to the said Consent Order.

15.  As regards the $1,250,000 that R was due to receive at that time, the parties agreed that out of this $1,250,000, a sum of $200,000 was to be paid to R’s solicitors to settle their legal costs.  The balance would then be utilized to cover the monthly expenses of the parties.  P would get $44,000 per month and R would get a total of $120,000 as from 16 May, 2013, of which $100,000 was for living expenses and $20,000 for his legal costs.

The Retirement Fund

16.  With the said Consent Order the parties should have settled down in the interim while preparing for the final battle on ancillary relief.  Unfortunately, it did not so happen. What subsequently happened was that according to R, unbeknown to him, a sum of $1,149,204.64 (“the Retirement Fund”), being a substantial part of his retirement funds with XX, was deposited into his bank account on 21 June, 2013.  This sum was paid out from M, the fund administrator upon his termination and there was still a balance of $222,333.46 remained with M.

P’s Ex-parte Application

17.  When this first came to P’s attention on 19 July, 2013, R had already utilized $223,317 for his expenses without letting her know.  P took the view that the Retirement Fund falls within the ambit of “severance payments” in paragraph 2 of the said Consent Order and should be held by R’s solicitors in escrow.  R, for that reason, has been in breach of the said Consent Order.

18.  Consequently, P took out an Ex-parte Summons on Notice on 22 July, 2013 restraining R from further disposing of the proceeds of the Retirement Fund without further order of the order.  After having heard the legal representatives of both parties, on the same day I gave an interim injunction restraining R from further disposing of half of the Retirement Fund, ie $574,602.32 without further order of the court.  I also gave directions that the Ex-parte Summons be treated as an Inter-Parte Summons and be adjourned for argument. 

R’s Application

19.  Meanwhile on 11 October, 2013, R took out a summons seeking variation of Paragraph (ie Recital) E (c) of the Order so that he may be allowed to pay all his legal fees from the escrow funds currently held by his solicitors.  It has become clear during the hearing that R in fact wants to make use of the remaining of the Retirement Fund to cover his expenses and legal costs that he said are not “anticipated items” meant to be covered under the said Paragraph E(c).

20.  At the same time, he also sought the following orders:

“2.	All the bank statements for the sum of HK$500,000 previously held in escrow by Messrs. Ip & Healthfield (note:  P’s former solicitors) and Messrs. Howse Williams Bowers be produced and unredacted copies thereof be supplied to the Respondent;
3.	The Petitioner do refrain from making false allegations against the Respondent;
4	The Petitioner do produce and handover to the Respondent the Children’s original vaccination records.”

P’s Case

21.  P’s case is that the Retirement Fund falls within the ambit of “severance payments”.   She takes the view that all sums arising out of R’s termination of employment including the Retirement Fund should be held by his solicitors in escrow.  She sees R’s act as a continuation of multiple efforts to dispose of the family assets with the aim to defeat her claim for ancillary relief.

22.  Mr Clough, for P, submitted that the wife wants to preserve what remain of the family assets.  Given that R is unemployed and that it is unclear whether or not he is going to return to the United States, the family’s future is precarious but at the same time they are already running out of funds.  He also argued that R failed to give full and frank disclosure of the Retirement Fund; in particular, he failed to disclose it in the PTR hearing of 26 June, 2013.  It was not until 18 July, 2013 that P was informed of this but by then R had already spent $223,317, leaving $925,887.64 only.  In the circumstances, the court should retain what can be retained and there should be complete disclosure before monies are released.  He asked for the Retirement Fund be paid into court and that the monies shall not be paid out until further order of the court.  That said, P agreed to take into account the increase in school fees for the children in the new semester and the school trip and the same can be deducted from escrow.

R’s Case

23.  Ms Campbell-Moffat SC, on behalf of R, conceded that the husband’s application is unattractive but argued that apart from the legal costs, all the items such as the school fee increase, US tax payment, tax loan repayment and family medical insurance are all pre-existing commitments which cannot be avoided. 

24.  Further, she argued that there is no prejudice to P. 

25.  First, her capital claims and maintenance until the ancillary relief hearing in December, 2013 are fully covered by the said Consent Order.  Secondly, the value of the matrimonial home represents 51% to 59% of the total pool of family assets. Even if the Retirement Fund is depleted, P’s share of the family assets is not at risk.

26.  On the other hand, if the restriction is not removed, R will be prejudiced as he will be unable to satisfy pre-existing commitments and other family expenses not covered by $100,000 per month.  His legal costs have increased because of the unanticipated multitude of legal correspondence exchanges, for example, the correspondence exchanged regarding seeking approval to pay family expenses and approval to take the children out of the jurisdiction for holiday.  R needs a level-playing field.   Since P is legally aided and does not have to worry about legal costs, he should have access to sufficient funds to finance his litigation.  

Breach of the said Consent Order?

27.  P’s case is premised on R’s breach of the 1^st Consent Order and the said Consent Order.  As the parties agreed that the said Consent Order is to replace the 1^st Consent Order, it is therefore not necessary for me to deal with whether there is a breach of the 1^st Consent Order. 

28.  To start with, to say that one has breached a court order is a serious allegation since the contemnor could be liable to committal proceedings.  Any ambiguity in the order or undertaking will be resolved in favour of the alleged contemnor:  Hong Kong Civil Procedure 2014, at para 52/1/16. 

29.  Paragraph 2 of the said Consent Order stipulates that “severance payments” include but not limited to the said $1,250,000 or whatever sums ultimately paid out by XX in satisfaction of termination payments including those referred to in Recital C(a), (b), (c) and (d) and the same shall be held by R’s solicitors in escrow.

30.  I agree with Ms Campbell-Moffat SC that Paragraph 2 refers to those payments made by XX in satisfaction of termination only.  Here, the payment of the Retirement Fund was made by M, the scheme administrator for the ORSO/MPF plan and not by XX.  I also accept that the Retirement Fund was accrued during R’s employment and is independent of the severance payments.  

31.  In any event, it is clear that when the said Consent Order was made the Retirement Fund was not envisaged to be included as part of the termination payment because P simply was not aware that it would be paid out upon termination.  The reason being that according to R’s Form E, it was stated that the Retirement Fund would not be realisable until January, 2026.  Hence, it is not a surprise that P virtually had no idea that the fund would be paid out.

32.  For the above reason, I hold that R is not in breach of the said Consent Order.

33.  However, this is not the end of the matter.  I need to consider whether there are any good reasons to restrain the monies or conversely, any good reasons to allow its use as prayed for by R.

Preservation of Family Assets

34.  Clearly, P wants to preserve the family assets.

35.  The following facts are not in dispute:-

1.	The $250,000 referred to in Paragraph B(a) of the said Consent Order is now depleted;
2.	The $250,000 referred to in Paragraph B(b) of the said Consent Order still has a remaining balance of $118,000;
3.	As for the stocks referred to in Paragraph C of the said Consent Order, $121,071 is available for use now, the second sum of $142,638 will be available this month and a final sum of $160,000 will be vested in February, 2014;
4.	The $1,250,000 referred to in Paragraph E and Paragraph 2 of the said Consent Order will be depleted by the time of trial in December, 2013; and
5.	R has already exhausted half of the Retirement Fund, now leaving $574,602.32. This is the sum being restrained by the interim injunction dated 20 July, 2013.

36.  Based on the above, the liquid assets available for the use of the family by December, 2013 will be $956,311.32 (ie $118,000 + $121,071 + $142,638 + $574,602.32).

37.  Ms Campbell-Moffat SC submitted that if R is allowed to use the said $574,602.32, there will still remain stocks worth of $263,709 ($121,071 + $142,638) as buffer and the matrimonial home should be sold as soon as possible. 

38.  I agree that as far as arithmetic goes it may well be the case.  However, I must not lose sight of the fact that R is now unemployed and P is working as a part-time waitress earning a meagre of $5,000 only.   In the past few months, R attended job interviews in the United States but so far the prospect is unknown.    What is more, R now has a new partner and is expecting a baby.  The children are studying in an international school and their school fees are expensive.  I agree with Mr Clough that they both seemingly want to remain in Hong Kong and want the children to continue with their education but so far there are no financial proposals to enable this to happen, even in the short term.  If ready funds are not available, their education would be at risk.  I must consider not only the interest of the parties but also that of the children.

39.  Given that the parties need $144,000 as monthly expenses, even if the February, 2014 vested stocks and the $118,000 now being held by P’s Solicitors are included, it would mean a total of $541,709 only ($118,000 + $121,071 + $142,638 + $160,000).  This would merely be sufficient for the family to last for a bit more than 3 months. Unless the matrimonial home is liquidated by then, the family would be left without any funds.  In my view, given that the proposal for sale was only put forward by R one day before the hearing of the present application and the trial is yet to come in a few weeks’ time, there is no guarantee that this could be done.

40.  On this analysis, I agree with Mr Clough that the family assets need to be protected.

Full and Frank Disclosure

41.  P complained that R failed to give full and frank disclosure of the Retirement Fund.  In reply, Ms Campbell-Moffat SC submitted that the release of the fund was unexpected.  It was triggered by the termination of the employment and the money was paid into R’s account by default.  It took him some time to clear the picture.

42.  Without having heard the oral evidence of the parties, it would be difficult for me to come to a definite conclusion as to whether or not R failed in his duty.  This would have to be dealt with in trial. 

43.  That said, on the materials before me, I have to agree with Mr Clough that by the time the parties came to the PTR hearing on 26 June, 2013, R had already known of the receipt but he told no one about it.  Furthermore, R is an experienced professional accountant and auditor and had been with XX for nearly 12 years, for this reason and also for another reason that I am going to elaborate in paragraph 52 below, it is hard to believe that he was not aware of the circumstances under which the Retirement Fund would be released. 

Prejudice to R

44.  R said he needs the money for settling the pre-existing commitments and his legal costs.   By the time of the hearing of the present application on 28 October, 2013, he has already exhausted half of the Retirement Fund, he is now asking for the use of the remaining half.  During the hearing, R produced a Schedule setting out (1) the items that he had already paid out from the fund, and (2) the forthcoming items.  According to the Schedule, he is still $580,000 short; incidentally this is about the same amount restrained.

45.  Ms Campell-Moffat SC submitted that all monies were consumed properly and for legitimate purposes and their liabilities cannot be avoided.  She ensured that each and every payment have been and will be properly accounted for.

46.  On the evidence before me, I have not been able to carry out a minute examination of each and every item that is said needed to be paid.  I reckon that $30,000 was paid as R’s legal costs for the present application and a further sum of $390,000 will be paid for the trial of the ancillary relief.  I note many of these items are for tax loan repayment, US tax payment, the children’s school levies, the monthly increase in school fees and the insurance payment.  There are also items that R incurred for his job interviews in the United States and the deposit paid to the Hong Kong Adventist Hospital, probably for the maternity care of his new partner.

47.  To me, it seems there are far too many items that are not “anticipated”, to use the term employed by R.  Clearly, the said Consent Order is meant to be an interim financial arrangement for the family up to at least the trial.  R agreed that $100,000 and $20,000 per month are adequate provisions to settle his monthly family expenses and legal costs.  As an accountant and auditor, he should have carefully assessed his needs before agreeing to the said Consent Order. Pursuant to the said Consent Order, up to November, 2013, R has already received a total of $1,290,000, the breakdown of which is as follows,

	Amount	Relevant Recital of the said Consent Order
1.	$250,000	B(a)
2.	$200,000	E(a)
3.	$140,000 ($20,000 X 7 months)	E(c)
4.	$700,000 ($100,000 X 7 months)	E(c)
	Total: $1,290,000

48.  With half of the Retirement Fund $574,602.32 already spent, R has already received 44.50% more. Another half would mean getting nearly double.  For what I can see is that there are far too many exceptions.  I fail to see why those items such as tax loan repayments and school levies could be “unanticipated items”.  

49.  The objective fact is, apart from the negligible income of the wife, the parties essentially have no income at all.  In my view, what the parties should have done is to tighten up their budgets and restrain themselves in spending.  The previous mode or standard of living is, at least for the time being, a matter in the past.  On this, I consider there are some merits in P’s complaint that R incurred substantially in flying to the United States 3 times between July and September, 2013.

50.  Turning to R’s claim that he needs the money for his legal costs, he put the blame on P’s uncompromising attitude that led to the escalation in costs.  I think it is fair to say that both have been difficult to the other throughout.  As mentioned above, there have already been a series of legal battles since 2011. It is clear that both have long completely lost what little trust they might have on the other.  I am afraid this is a not very good reason.

51.  As for the legal costs for the ancillary relief, when the said Consent Order was made on 17 April, 2013, R knew well that the FDR had failed and the dispute would have to proceed to trial.  When the Retirement Fund was received, the ancillary relief had already been listed for PTR, it meant that even without this money, R was prepared to fight and apparently he was contented with the $20,000 legal costs per month.

52.  R’s Form H (Estimate of Costs) dated 16 April, 2013 for the FDR hearing stated that the estimated costs of the trial were $285,000.  This figure remained unchanged in his Form H dated 25 June, 2013 for the PTR hearing.  However, in his Form H dated 25 October, 2013 for the present application, the estimated costs for trial rocketed to $395,000, representing a 39% increase.  Since I am not presented with a budget or the particulars, I do not know why this happened.  Further, it is interesting to note that even assuming that as at 17 April, 2013 there were no outstanding legal fees payable by R, with $20,000 per month, counting from May, 2013 and up to the time of trial in December, 2013, he would be able to get a sum of $160,000 only, which on the face of it would barely be sufficient for his purpose.   Again, as a professional accountant who should have higher sensitivity when it comes to figures than a layman, for my part it is hard to believe that this all too obvious shortage would have failed to catch his eyes.  This is another reason why I say it is hard to believe that R was not aware of the conditions of payment of the Retirement Fund.

Conclusion

53.  That said, in the final analysis, I believe that a balance must be struck.  On the one hand, for the reasons that I have set out above, I have no doubt that the family’s needs in the coming months ought to be catered for but on the other, I accept that there are some commitments or contingencies that R may need to deal with.  Though it appears that with the proposal that the matrimonial home is to be sold as soon as possible, one can finally see light at the end of the tunnel, there must be some lapse of time before this could be materialized and funds be available for use.

54.  I believe there should be a buffer of say 6 months in order to ensure that the parties and their children could receive the minimum living expenses as agreed.  On the basis of $164,000 per month (ie $44,000 for P and $120,000 for R), this would mean $984,000.

55.  The $1,250,000 will be depleted by December, 2013.  Given that up to February, 2014, there will be funds totalling $1,116,311.32 (ie $956,311.32 referred to in Para. 36 above plus $160,000 being stocks to be vested in February, 2014), this would leave a balance of $132,311.32 ($1,116,311.32 - $984,000).  I round it down to $132,000.

56.  Taking a board brush approach, I would allow R to use half of $132,000, ie $66,000 as his legal costs on the top of $20,000 that he is now withdrawing.  As for the remaining $66,000, R is allowed to use it for the children’s school fees increase, unforeseen education expenses and family insurance.  By “family”, I mean P, R and their children. Use of the money for any other purpose should only be allowed with the consent of the parties or the sanction of the court.  

57.  Mr Clough asked for the balance to be paid into court.  I agree with Ms Campbell-Moffat SC that this would entail further costs and is a detriment to the wife.

Orders

58.  For the above reasons, I give an order that:

1.	Paragraph 1 of the Order dated 22 July, 2013 be varied to the extent that the Respondent be restrained from further disposing of the proceeds of the Retirement Fund in the sum of $442,602.32 without further Order of the Court;
2.	The Respondent do forthwith deposit the said sum of $442,602.32 into his solicitors’ account, Messrs. Hampton, Winter & Glynn (“HWG”) in an escrow account until further Order;
3.	The Respondent is allowed to use $132,000 from the proceeds of the Retirement Fund for the following purpose: (1)  $66,000 for his legal costs; and (2)  $66,000 for the children’s school fees increase, unforeseen education expenses and family insurance;
4.	The Respondent be restrained from using any of the joint family assets, save and except as provided for in paragraph 3 above and the monthly sum of $120,000 from the sums held in escrow with HWG without an order of the court or the written consent of the Petitioner; and
5.	The Respondent do account for and provide all documentary evidence regarding the payment of such proceeds of the Retirement Fund forthwith.

59.  With the consent of the parties, I leave the remaining paragraphs of R’s summons (ie paragraphs 2 to 4) to be dealt with in trial.

60.  Finally, I reserve the issue of costs.

Mr Neal Clough, instructed by Howse Williams Bowers, Solicitors for the Petitioner

Ms Audrey Campbell-Moffat, SC instructed by Hampton, Winter & Glynn, Solicitors for the Respondent